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For Canadians, Homeownership is a key milestone in life. As of 2016, approximately 63% of Canadians owned their homes. This presented a 3% rise from 1999. However modest this rise in the number of Canadians living in their property is, it is a huge indication of how important owning a home is, for Canadians.
For most people, the only way they can afford a house is by taking up a mortgage. Mortgages are tools that allow you to own and live in your dream home as you build equity, and require a great deal of financial planning and prudence.
This is because mortgages are long-term financial commitments that last anywhere between 15 to 30 years. In this period, a proportion of your income is committed to repaying the monthly installments. Once you take up a mortgage, it is important to avoid unnecessary spending or to take on non-essential debt to prevent unnecessary financial strain.
At some point in the future, you may get an investment opportunity or face an emergency that requires a substantial amount of money. In such situations, most people with mortgages often think that their only options for emergency funds are credit cards and overdrafts.
However, if you need a longer-term loan, a second mortgage Halifax is what you need. Second mortgages are loan instruments that allow borrowers to take up credit against the increased home-equity they have earned through their first mortgage payments. And, they’re accessible even if you have not completed payments for your first mortgage.
In this article, you find everything you need to know about taking a second home mortgage Halifax.
Mortgages allow borrowers to build their equity in their homes while they live there. With every passing installment, your share of the property increases. After some time, you can use the share increase as security for a second mortgage Halifax.
However, lenders will also look at other critical elements to determine whether you qualify for a loan. To begin with, they will first need to verify that you have the financial capacity to repay an additional loan. For this, you will have to present your two most recent bank statements and payment stabs for several months. Any additional loans, other than your mortgage, being deducted from your salary will reduce your chances.
From there, they will do a credit check on you to ensure that your score is good, and your repayment history is stellar. The better your score and history, the better rates you will be offered.
At this point, the lender will require a listing of your equity for the property. This will determine how much credit you can access.
Normally, first mortgage lenders do not give second mortgages. Therefore you will have to apply for a second home mortgage Halifax from a different lender. Compared with first mortgages, a second home mortgage Halifax usually carries more risk for the lender.
This is because an unprecedented challenge may arise, and you may be unable to honour your mortgage obligations. If this happens and your house is foreclosed, the second mortgage lender will only be compensated after the first mortgage lender’s full compensation.
As a result, second mortgages attract higher interest rates than the first one. However, they still attract much lower interest rates compared to credit cards. Normal rates from banks and other high-profile mortgage lenders range from 5-10%.
The amount you can access for a second mortgage Halifax is approximately 80% of the loan to value ratio (LTV) minus the outstanding value on your first mortgage. This means that once the house is appraised, your lender will offer you 80% of that value. However, they will also deduct the unpaid amount on your first mortgage.
It is vital that you choose the right lender. First and foremost, you want a lender that has experience with second mortgage loans.
On top of that, they must have a reputation for exemplary customer service. Lenders with these two attributes are more accommodating when challenges arise. They go out of their way to help you find the right solution in such scenarios.
Equally important are the terms of the loan. In addition to the interest rate you will be charged, you should also pay attention to other factors such as:
Even after you have agreed on the terms with your loan agent, make sure that you go through the loan agreement before signing it. Some of the things that you agree on verbally may not make it to the contract. Or, there may be some things that were not well explained. To be safe, you can ask a mortgage expert to go through it for you.
One of the most challenging aspects of looking for a loan is sifting through lenders. You have to set time aside to visit different loan places to get their loan terms. However, it does not have to be so anymore. Loans Geeks, an independent financial-service network, is the solution.
On their platform, you can access all the information about different lenders and their terms at the comfort of your home or office. When you find a suitable lender, you can make the application and secure the loan via their platform.
Loans Geeks gives you access to different types of loans, including private mortgages.
If you are well into your first mortgage and require some cash, taking up a second mortgage is one of your best options. These loans are especially suitable if you want to renovate your house or consolidate high-interest debt.
Since second mortgages are based on the added equity you earn by repaying your first mortgage, you need to repay a certain proportion of your first mortgage to qualify. With most banks, you will qualify after repaying at least 20-25%.
Other factors that play a role include your credit score and other deductibles in your salary.
A second home mortgage Halifax is a line of credit extended to borrowers with existing mortgages. This mortgage is secured with the added equity you earn by repaying your first mortgage.
The line of credit lenders extend for second mortgages vary from one applicant to the next. The factors used to determine the amount include your income, credit score, serviceable debts, and the amount of equity you have built up.
Normally, it takes between four and six weeks for the loan process for a second mortgage to conclude.
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Since the risk of a second mortgage is higher than the first one, it tends to be about 2% to 5% more than the first mortgage products. The interest rates will also vary depending on factors such as adjustable or fixed rates, total loan value, type of property, credit score and other important factors.
If you are making application for the second mortgage loan against a home equity, you need to disclose if you are currently occupying the home or not. While you do not have to occupy the home to be eligible for a second mortgage, you might have to pay higher interest rate if it is an investment property. If you are renting out the home, they will treat it as an investment property.
The second mortgage will not affect the terms of the first mortgage. In case you decide to refinance your first mortgage at a later stage, you will first have to pay off your second mortgage to be eligible for refinancing.
Most of the lenders charge three-month interest penalty for early second mortgage repayment, but the terms differ from lender to lender. It is best to speak to your lender well in advance to ensure that you know about the penalties in case you are looking to close the second mortgage before it is due.