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How does Second Mortgage Interest Rates Compare with Consumer Credit Card Rates?That is a very good question. It is a well known fact that interest rates on second mortgages are not as low as on first mortgages.
Depending an various factors, such as your credit score, your debt service ratio, the equity in your property and your employment history,
interest rates on a second or third mortgage can vary from 8.55% up to 16%! (which is not a lot better than bank credit cards, which sits at around
18%, but it is a heck of a lot better than department store cards with interest rates as high as 28%!
But what is a Second Mortgage really? In essence it is nothing more than an equity take out.
Equity is the difference between the appraised value of your property, and the balance on your existing mortgage.
Depending on the lender that you use, you can take out between 75% and 85% of the value
of your property.
Where do you apply for a second mortgage? Most financial institutions are not too eager to grant you this type of loan, so you will probably be looking a private lenders.
It can sometimes be hard to locate private lenders. The Yellow Pages is a good source, but I still belief in word of
mouth or using a reputable mortgage brokerage company.
Remember private lenders are in it for the money, and though they fulfill a much needed niche in the market,
be very diligent in reseraching these companies. Interest rates and lender fees for this kind of financing has an
enormous spread. try to find onewith a decent interest rate and low lender fees. Always ask about the hidden fees involved.
What Hidden Costs Should I be Looking for? The most common, is the lender fees. This is not the fee that a brokerage may charge you, but the fee that the lender
with whom the brokerage places your mortgage, may charge.
There will almost always be an appraisal required for a second mortgage. Remember, the lender considers you a risk, and
therefore needs to secure his investment with the equityin your property. In the event that you default on your second
mortgage payment, they want to ensure that there is enough equity in your property to pay out the first and the
second mortgage.
There will also be lawyers fees involved, as the new mortgage has to be registered at the land titles office against the title of your property.
Title insurance is in some times considered by your lender and in most cases this speeds up the funding process quite a bit.
In some cases the lender will be willing to use title insurance instead of a lawyer, but in most cases it
is used in conjunction with a lawyer.
What Is The Qualifying Criteria for a Second Mortgage? Qualifying criteria for a secon mortgage a a lot different than for a first. Because a Second Mortgage
almost exclusively depends on the equity in your home, this is the most important, and in in some cases,
the only qualifying criteria, however, most lenders would like to see an employment letter or any sort of
income letter to ensure that you will be able to make the mortgage payments.
For Self employed clients, a self declare letter of income is often enough, coupled with a couple of years of Revenue Canada Notices of Assessment.
The notices of assessment is not required to check on the income that you claimed, but it is to ensure that you do
not owe Revenue Canada any monies.
Credit Score is not as important when applying for a second mortgage, though a good score will save you a few points on interest. If you would like more information on second mortgages, please feel free to contact us. Maybe you would like to go back to the refinancing information, and learn a bit more about this option. You can also read the debt consolidation information again, to make sure that this will be a good option to consolidate your high interest consumer debt. If you would like more information on Second Mortgages, and how to apply for one, please feel free to
contact
one of our mortgage specialists for a one on one consultation.
You do not have to battle with high interest consumer debt. We would love to help you find your way back to financial well being.
If you would like o learn a little more about another mortgage topic, please feel free to do so at your leisure, and check back often, because we are continously adding more info for your information.
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