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Higher Interest

People get a second mortgage or even third, typically to consolidate debt without disrupting their first mortgage. There are many of other reasons however as well.

A second mortgage is a loan taken against a property that already has a primary mortgage. For the lender, the second mortgage carries more risk than the first, and this is reflected in the higher interest rate. The reason why the second mortgage carries more risk is that a default in payment by the borrower which results in the foreclosure of the property will see the proceeds from the sale used to repay the lender of the primary mortgage first. This means that the second lender runs the risk of not receiving full payment on the loan.

Using the equity in your Barrie home to access funds

A second mortgage will allow you to use the equity which you have built up in your home without making changes to your primary mortgage. Homeowners typically use a second mortgage to consolidate more expensive debt. Even though second mortgages are more expensive than first mortgages they still attract less interest than other forms of debt such a credit card debt, motor vehicle finance and overdrafts. They are also often used to carry out renovations or to pay for education.
If you qualify for a second mortgage you can borrow up to eighty per cent of the value of your home. Traditional banks offer HELOC’s or Home Equity Lines of Credit which is a type of the second mortgage, but if you don’t qualify you would have to approach a private lender for a second mortgage. The big banks generally do not approve second mortgages. HELOC’s are usually only available to those with a high credit score, and you can only borrow up to 65% of the equity in your home.
If you are contemplating a second mortgage contact us at Certified Mortgage Brokers Barrie, and we will help you with information, and put you in touch with the right people.

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Featured Rates

FIXED

LenderRateTerm
Mortgage Lendwise RateLendwise

2.39%

5-Year
Mortgage First National Bank RateFirst National Financial

2.69%

4-Year
Mortgage RMG RateRMG Mortgages

2.64%

3-Year
Mortgage Street Capital RateStreet Capital Bank

1.99%

2-Year
Mortgage TD Bank RateTD Bank

2.69%

1-Year

VARIABLE

TermRate
5-Year Variable

2.85%

3-Year Variable

3.10%

OTHER

TypeRate
Line of CreditStarting at

3.00%

Equity LoansStarting at

5.99%

Private MortgagesStarting at

5.99%

Qualifying for a second mortgage

To qualify for a second mortgage, you will require:

  • Equity on your home – equity is the difference between the market value on your home and the amount that is owed against the primary mortgage. You build up equity over time when you pay off the principal on the loan. Market forces can help to improve that equity as property prices rise. The higher the equity in your home the greater the chance that you will qualify for a second mortgage
  • Proof of regular payments of utilities
  • A regular income stream to ensure that you can repay the mortgage
  • A decent credit score – the higher your score the lower the interest rates you will pay

Many are interest only loans

Many second mortgage products are interest-only loans. This ensures that the repayments are lower. The principal amount will be paid off at a later date when the house is sold or additional funds become available. The average interest rate on a second mortgage is around 10% but this can differ substantially depending on the various risk factors.
You will have to pay origination costs on your second mortgage so bear this in mind and discuss it with your mortgage broker. You will also pay for the appraisal and legal fees. Before you commit yourself to a second mortgage you should have an exit strategy.

Speak to Certified Mortgage Brokers in Barrie. We have years of experience and we can help you with an estimate of costs and a plan to exit.

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