If you are living in Ontario Canada with a mortgage on your property, on which you have been making regular payments for over three to four years or less on accelerated payments, then the getting a second mortgage on the property is a good decision. Ontario is on top of the list when it comes to refinancing options on a property.
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Why Get a Second Mortgage?
So the question here is, why should you get a mortgage for the second time on your property? The answer is simple; it is the best way to get access to equity. It makes it easier for you to get a quick equity without the need to break the terms and conditions of the first mortgage. Getting a second mortgage will give you a chance to avoid a pay-out penalty related to the first mortgage.
Different Types of Second Mortgages
When the first mortgage payments undergo without a problem, property owners can choose to opt for other types of mortgages. The Home Equity Line of Credit (HELOC) is one form of mortgage that is easily secured by taking a second mortgage right after the first mortgage. Another option is to take a separate loan on the same property.
However, the in some ways HELOC is only available for approximately 65% of its purchase price or the market value of your property. The HELOC generally have a flexible interest rate, it allows you to borrow money when you need it.
Another type of mortgage is to opt for the home equity loan. A home equity works differently than a HELOC. The payments are decided by considering the difference between the total value of a property and the unpaid balance on the current mortgage.
The Paperwork Needed for a Mortgage
The paperwork associated with filing for a second mortgage is the same as the first mortgage. Before submitting the paperwork make sureit includes necessary documents needed to secure the mortgage. The documents needed are as follows:
- Home appraisal documents
- Any paperwork related to disclosures,
- The number of fees paid with receipts
- Any documents that can prove your means of employment or source of income
- Credit score to determine your capability to pay off the debt
- Social insurance number
- All paperwork related to the first mortgage
- Bank statements
A Suitable Exit Strategy on Second Mortgage
As a property owner, you must have an intention to pay down the mortgage related payments as soon as possible on your second mortgage. Any delays in payments will have a negative effect on your mortgage payment structure. Before making, any commitments related to the mortgage financing for the second time plan an exit strategy to protect your assets.
The best way is to discuss the various options with an experienced mortgage professional. Come up with a plan that allows you to pay off the second mortgage quickly. If you find it hard to make regular payments, another option is to opt for an eventual refinancing solution to help avoid the renewal of mortgage for the second time repeatedly.
Sources:
https://www.canada.ca/en/financial-consumer-agency/services/mortgages/home-equity-line-credit.html
https://www.canada.ca/en/financial-consumer-agency/services/mortgages/borrow-home-equity.html
https://www.ratehub.ca/second-mortgage-canada
https://www.whichmortgage.ca/article/what-you-dont-know-about-second-mortgages-220579.aspx