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Second Mortgage Info
Second Mortgage Montreal
Second Mortgage in Montreal
The housing market in Montreal is witnessing an upsurge in demand for houses. With the rates at an all-time low, this may be the best time to take a second mortgage if you have some equity in your property.
What Is A Second Mortgage?
A second mortgage is an additional mortgage taken on a property with an existing mortgage. The rates of a second mortgage are usually higher than the first mortgage because the second lender stands a greater risk of not getting paid. In case the borrower defaults and a foreclosure is needed to pay back the loans, the first lender will be paid first, but the second lender might not be paid in full.
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Where To Get Second Mortgage?
Not all lenders offer a second mortgage because of the higher risks involved. For individuals with a high equity on their property and a good credit score, it is easy to get a second mortgage from a conventional lender. Second mortgages in the form of a home equity loan are the cheapest, but if you have a low equity in your property or a bad credit rating, you would need a private lender or trust company for a second mortgage. The reason for this is that conventional lenders won’t borrow a person with a bad credit score loans, more so the second mortgage. Meanwhile, private lenders and trust companies are not as strict in their requirements as they only need to be sure of your ability to pay back and the value and marketability of your property.
Why Take A Second Mortgage?
There are many reasons for taking a second mortgage, but the most common are for debt consolidation. You can use a second mortgage to consolidate debt and clear other financial obligations because their rates are usually lower compared to unsecured lines of credit and high-interest credit cards. A second mortgage can be taken to finance the home renovation, repairs, fund your child’s college, and go on a vacation, make your credit card debts and so on. Apart from providing cash for settling your pressing financial needs, a second mortgage can help to boost your credit rating and increase your chances of getting credit from the traditional lenders.
Qualifying For A Second Mortgage
Qualifying for a Second Mortgage
In Montreal and other places in Canada, the lender will assess four areas before giving you a second mortgage. These include:
Equity: The larger your equity in the property, the easier it is to qualify for a second mortgage.
Credit score: The higher your credit rating, the lower your interest rates.
Property: Lenders check the market value and marketability of your property in case you are unable to pay back the loan. Factors such as income and credit score can change with time, but the property can still be foreclosed if the borrower defaults.
Income: Lenders check your source of revenue to be sure you have the financial capability to repay the loan.
Should You Take A Second Mortgage?
Going by the low rates of mortgages in the Toronto housing market, taking a second mortgage can look attractive. But not everybody needs a second mortgage. Ensure you seek the advice of an experienced mortgage broker who will explain the details and the best time to take a second mortgage.
Montreal’s housing market is booming, and you may be motivated to take on more loan, but consider the implications for your future. The undertaking can be risky for both the borrowing and lending parties, but due diligence can save you a lot of trouble.
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Montreal Mortgage Frequently Asked Questions
What is a Mortgage Term?
The loan that you make to buy a house or some other property is called a mortgage. The principal refers to the amount borrowed. Each mortgage payment pays off part of the principal plus the interest.
You have custody over the property. However, if you fail to pay the loan and interest according to the terms of the contract, the lender may repossess the property.
What is a Down Payment?
A down payment refers to the money you pay for real estate property. This money is paid upfront and the rest of the cost of your new home is covered by your mortgage. For properties that cost up to $500,000, the minimum down payment in Canada is 5% – however, do take note that your lender may sometimes require a higher down payment.
But what if the cost of the property is more than $500,000? If that is the case then the interest is 5% for the first $500,000 and then 10% for the remainder of the cost.