Why would someone take a second mortgage out on their home? Well, there are a variety of reasons. You may want to pay off debt, do some renovations, or even pay for a child's education. In some cases a second mortgage makes more sense than refiancing a first mortgage. Perhaps the payout penalty will be too high, for example.
A second mortgage is done based on the equity in your home. Equity is the difference between the value of your home and the balance left owing on your mortgage. Second mortgages generally come at a higher cost than first mortgages. Interest rates are usually more, and lenders often charge a fee up front that is worked into the amount of the loan. These fees are dependent on the lender, the client's credit history and ability to pay back the loan.
The documentation required for second mortgage is generally less stringent than what it takes to obtain a first mortgage. This is because second mortgages are generally done by "equity lenders" or what we call "B" lenders (major banks are "A" lenders).
If you are interested in obtaining a second mortgage on your property, please call us. We will discuss this option, as well as several others, with you to determine which is the best mortgage product for your individual situation.