It is no secret that property values have gone up in Canada in the last 15 years. People living in certain areas like Toronto and Vancouver who bought their homes more than 2 decades ago have more than doubled the value of their properties.
The recent huge increase in real estate market values mean that the equity built in their homes by homeowners have gone up as well, making it a good source of funds that is just waiting to be tapped by getting a second mortgage.
Do You Really Need A Second Mortgage?
Getting a second mortgage is a good idea if you need a substantial amount of cash for financing a college degree for your child or funding a home renovation project. It can pay for any event or expense for which you don’t have the cash in your savings for.
Note that once approved, a second mortgage is still an obligation that has to be paid. Expect that the interest rates will be higher than that of a primary mortgage. You can try to negotiate a lower rate if you have verifiable and consistent income, good credit score, substantial equity, and the luck of having your property in a coveted neighbourhood. There will also be legal and broker fees that you’ll have to pay for the second mortgage to push through.
Who Lends Money for A Second Mortgage?
Private lenders and small financial institutions are the usual providers for second mortgages. They are not easy to seek out and bet, so most individuals who want to get a second mortgage is better off getting the assistance of a mortgage broker who specializes in second mortgages.
How About Broker Fees for a Second Mortgage?
It would be unfair to think that mortgage brokers do nothing to deserve payment for their efforts. The fees are not cheap and this is why mortgage brokers will typically make sure that the other party knows what the fees actually mean before giving an answer.
Broker fees for a second mortgage is affected by several factors such as how much time the broker will have to spend to secure the second mortgage and how much money is being borrowed. Generally speaking, the bigger the money being borrowed, the lower the broker fees are for the second mortgage in terms of percentage. Note that legal issues such as eviction, foreclosure, or marriage separation will mean a higher broker fee.
Will Appraisal Be Required?
It is typical for a lender to prefer a personal inspection of the property to ensure that it is worth the risk for the lender. You may choose to get your own appraisal though most lenders will have a list of professional appraisers that they trust.
Should You Hire a Lawyer?
Though you might feel that you don’t need the services of a lawyer to save on legal fees, getting a lawyer to review your second mortgage’s terms and ensure that everything is in place will protect you in the long run. The fees can range from $1,000 to $2,000 but it is an investment that will ensure you don’t have to pay for things that you were not informed about prior to signing the terms for your second mortgage.
We hope that this write up was able to answer most if not all of your questions about getting a second mortgage. Should you have more concerns that were not addressed in this, feel free to talk to us at Homebase Mortgages.