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Second Mortgage Info
The Pros and Cons of Getting a Second Mortgage
People get a second mortgage for the purpose of consolidating debt. By doing that, you will be able to deal with your debt without disrupting the details of your first mortgage. However, that second mortgage still needs to be paid eventually and you need to deal with your first mortgage before paying off your second.
At Certified Mortgage Brokers Ottawa we are here to help you understand the intricacies of a second or even a third mortgage.
By working with us, we can help you find the lowest rates that are within your income bracket. In case a second mortgage in Ottawa is a pretty good option for you, we will help you find the best possible lenders who can offer you the lowest rates or at least rates that are within your budget.
The main reason why you would want to get a second or even a possibly third mortgage is to consolidate your real estate debt. One of the best options and perhaps even the best option you have, is to obtain some much needed funding directly from your home equity.
It is no secret that your home equity really has a very low interest rate. You can use the cash you generate from that equity to pay off your other loans. Of course, we will also discuss other possible strategies to reduce your total amount of debt.
Is it possible to get the lender to pay you instead you paying the lender? Yes it is via reverse mortgages.
The idea is simple. You will be able to convert part of your home’s equity that the lender will pay out to you. You can even raise up to 40% of the total appraised value of your current real estate property.
Of course there are certain conditions that will apply before you can take advantage of reverse mortgages. These factors include the age of your spouse, your age, the type of home you are living in, and the location of the property.
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Before you take a second mortgage in Ottawa you should understand the details of any mortgage. Here are a few things you should consider.
The type of mortgage you take will dictate how much you have to pay. A conventional mortgage will have you pay at least a 20% down payment either on the purchase price of the home you are interested in or its appraised value. A high ratio mortgage on the other hand is your next option if you can’t pay 20% down payment but you need to get insured with the CMHC Canadian Mortgage & Housing Corporation.
You have two options when considering the repayment plan you would like to use. The first option is via an open mortgage. This plan has a shorter term, usually six months up to one full year. This repayment plan allows you to pay your mortgage faster but you will get a higher interest rate.
The second option is via a closed mortgage. This option has a set term and it is usually longer – usually from six months up to ten years. However, it has limited payment options. Should you decide to refinance your mortgage before the end of your term you will have to pay certain penalties.
You will also need to choose between a variable rate mortgage and a fixed rate mortgage. Variable rate mortgages have rates that move up or down depending on the prevailing prime rate values of the market. Fixed rate mortgages on the other hand do not fluctuate. This is a good option when the prevailing prime rates are on the rise.
Mortgage life insurance protects your family or any of your heirs from the loss of the home in case you or your co-borrower dies before the mortgage has been completely paid for. This insurance pays the outstanding balance of any mortgage that has been insured up to one million dollars.
Another kind of protection that you should consider is a disability rider. This rider is available for mortgagers that age 18 to 69. You can also get a joint coverage for you and your spouse and at no extra cost. You can also get coverage for loss of employment, which can cover your mortgage up to 3 thousand dollars each month. Note that this coverage is only effective for nine months and you can only claim the benefits after you have been off work for a total of 2 months or 60 days.
One final type of coverage that you can apply for is a critical illness rider. This is rather important for people who may suffer from stroke or heart attack. The coverage amount for your mortgage will be equal to the coverage of your life insurance. The coverage amount should be anywhere from a thousand dollars to one million dollars.