A second mortgage is a very handy option for those who need access to a sum of money for a certain financial obligation and are searching for a loan that can provide them with it. A second mortgage, which is also known as a home equity line of credit (HELOC), is a type of loan available to Canadians who are currently paying for a primary mortgage. It allows them to use their home as collateral and gives them access to 80% – 85% of their home’s equity.
Here are 3 common reasons why Canadian homeowners might decide to use a second mortgage:
Consumer debt is one of the top reasons why a homeowner might decide to take out a second mortgage on their home. With credit card interest rates averaging at 19.99%, it becomes a lot cheaper to take out a second mortgage with a slightly higher interest rate than your primary mortgage in order to payoff your high-interest debt on your credit cards and personal loans.
If you need a large sum of money to pay for your child’s education, your home renovations, to invest in another property, or for any high-priority expense, then a second mortgage is a great option due to its reasonable interest rates.
If you’re in need of a loan but have poor credit, then you could still be eligible to get a second mortgage based on the consistency of your monthly mortgage payments and the amount of home equity that you’ve already acquired.
Even though there are various benefits of a second mortgage, there are some disadvantages that need to be discussed. The primary drawback for a second mortgage is its risk. One of the biggest problems with a second mortgage is that you have to put your own home on the line. This means that if you’re unable to make your payments, then your lender will be able to claim your home through foreclosure.
If you’re thinking about getting a second mortgage and need a more detailed understanding of it, contact our mortgage professionals today. Our highly experienced mortgage brokers will consult with you concerning your needs and will offer the best possible solution pertaining to your particular situation.