How Does a Second Mortgage Work?
A second mortgage is a second loan that you can take out on your home in addition to your primary mortgage. In most cases, you can borrow up to 80% of your home’s value, minus the balance still owing on your primary mortgage.
The two mortgages will continue to be paid together. The second mortgage is usually loaned for 1-2 years, although the borrower may choose to extend the loan if they wish.
While getting a second mortgage may be the right choice for some, it is not for everyone. To find out how a second mortgage could benefit you, get in touch with our experts.
Is a Second Mortgage a Good Idea?
There are many reasons why a homeowner will choose to take out a second mortgage on their home. Sometimes, the extra cash is helpful in emergency circumstances, like paying for unexpected medical expenses and damages to a vehicle or property. Some may choose to get a second mortgage if they wish to invest in their home by adding renovations and extensions. Our brokers can help you find out if applying for a second mortgage is in your best interest.
Second Mortgage Interest Rates and Risks
Taking out a second mortgage can be risky. In the case that you cannot afford either mortgage, your home will experience foreclosure to repay the loan. When your property is foreclosed, the lender of the primary mortgage will be paid off before the second lender.
Because the second lender must take on this risk, second mortgage rates tend to be much higher than that of your first mortgage.
While taking out a second mortgage is a great way to use your home’s equity, you are taking on a more significant, more expensive responsibility. Talk to our experts about your financing options.