The benefits of a second mortgage
What is a second mortgage?
A second mortgage is a loan taken against a house that already has a mortgage on it. In the event of a second mortgage, you are using your own property as collateral to apply for the loan. Your house is an asset, and over time, it can gain value. The second mortgage can be your Home Equity Line of Credit (HELOC) or home equity loan, which can be used to finance your loan without having to sell it. By using the built-up equity in your house, you can take out a second mortgage to finance other purchases by putting your home as collateral. Most individuals take out a second mortgage to secure a down payment for a new property. Below-mentioned is some of the benefits of a second mortgage in Mississauga:
- Access to your home’s equity
A common source of funds for individuals in need of working capital is accessing their property’s equity. The funds obtained from the property’s equity can be used to invest in a company, real estate, or any other investment source such as mortgage rental property that requires a considerably large amount of money.
- Helps in consolidating all your debt
When you have several credit lines and multiple loans, it can be extremely overwhelming if you have multiple instalments at high-interest rates. If you are constantly worrying about your several debts, you are more likely to pay extra interest. Applying for a second mortgage helps you consolidate all the loans into one single manageable payment.
- Assisting individuals with a bad credit score
One of the major advantages of second mortgages is that you can apply for them even if your credit score is poor or average. Even if you have a history of making irregular payments, it is fine. Second mortgages are classified as secured debts. This means that lenders will allow you to apply for it even if your credit score is bad. The interest rate on second mortgages is generally lower than on credit cards since the debt is secured by a mortgage.
- Loan amount
Second mortgages give borrowers the option to borrow significant amounts because the loan is secured by your property, which is usually worth a lot of money. You have access to more than you can get using your house as collateral. You can borrow up to 85% of your home’s value, but it depends on the lender.
- Lower interest rates
Second mortgages usually have lower interest rates than other types of debt. It helps to secure the loan with your house because it significantly reduces the risk for your lender. Because the loans are low-risk, lenders will offer lower rates for second mortgages, unlike unsecured personal loans like credit cards.
- Get rid of all your high-interest debt
A second mortgage can take care of all your high-interest debt and enhance your credit score. Additionally, second mortgages are also widely used to help with a wide range of various financial needs. With a second mortgage, the possibilities are endless; you can power your dreams through an asset you already own.
- Great alternative to refinancing
Second mortgages are much better alternatives to mortgage refinancing. It can help you save money on exit fees and legal fees.
- Home improvements and renovations
It can be quite costly to carry out home renovations. With the help of a second mortgage, you can access the equity in your house and cover those costs.
- Tuition and medical expenses
A second mortgage can be taken out to cover your school tuition payments, including covering your medical expenses, if your insurance does not cover large medical expenses.
Before you take out a second mortgage, you need to assess the risks involved and carefully plan your finances before making any decision. Get in touch with the experienced mortgage brokers at GNE Mortgages to know more about second mortgages in Mississauga or on mortgage rental properties. A second mortgage can help you pay off your debt completely and even put a down payment on a second property. Contact our team today to schedule an appointment.
