As you may know, a second mortgage is a loan that uses a homeowner's property as collateral, similar to their primary mortgage. Just like with primary mortgages, a homeowner can choose to refinance their second mortgage and replace their current second mortgage with a new one, ideally containing better terms and lower interest rates.
However, there are certain situations or circumstances where it would make the most sense for a borrower to refinance their second mortgage. In this article, our mortgage experts will detail when and why you should consider refinancing your second mortgage in Ontario.
When it's wise to refinance a second mortgage
As a Canadian homeowner, you likely have specific financial goals you want to obtain in the future.
That said, if your financial situation has recently changed to allow for a refinance of your second mortgage, there are several specific advantages this option can offer you to help you manage your debt and improve your overall financial situation in the long run.
These second mortgage refinancing benefits include:
Lowering Your Interest Rate and Paying Less per Month
Perhaps you had poor credit history or something else standing in the way of obtaining a low-interest rate when you initially applied for your second mortgage.
If your situation has improved and you can get a lower interest rate on your new second mortgage, this can help save you money in the long term. This is especially true of a fixed-rate mortgage.
Obtaining Better Loan Terms
Refinancing your second mortgage can also give you access to more fiscally beneficial loan terms to suit your financial needs, such as a shorter or longer repayment period or, as aforementioned, a fixed interest rate which can provide you with more security regarding your future payments.
If you are currently dealing with other obligations containing high-interest rates, such as personal loans or credit cards, you can reduce them into a refinance of your second mortgage.
Cashing out some of the equity in your home: You can choose to use a cash-out refinance on your second mortgage if you are in a situation where you need extra money for things such as home renovations or repairs, education fees, medical bills, and other potential expenses.
Improving Your Credit Score
Refinancing a second mortgage can also help homeowners to improve their credit score, such as by securing better loan terms that enable them to make timely payments on their new loan (a habit that does not go unnoticed when it comes to improving credit).
Are you considering refinancing your second mortgage? Keep these things in mind.
No matter the reason or reasons you may be motivated to refinance your second mortgage, there are some essential factors that you'll need to take into account before officially choosing this option.
Firstly, consider how long you plan to stay at your home, as a second mortgage refinance will not make much sense if you're considering selling soon. Ideally, you should only consider refinancing your second mortgage if you will likely still live at your house for the next 5 to 10 years.
Secondly, you'll also need to determine the closing costs of your second mortgage since a second mortgage refinance will not be beneficial if the closing costs or other associated refinancing fees are greater than the savings you want to achieve.
Last but certainly not least, you'll want to be as confident as can be when choosing your second mortgage refinance lender. Make it a priority to find a lender that can provide you with the best loan terms, and pay close attention to the interest rate and processing and closing costs.
With all of that said, it's essential that you weigh the pros and cons of refinancing before making an official decision to refinance your second mortgage. Consider your current financial situation, long-term financial goals, and plans before taking the plunge (or speak to one of our mortgage lending experts at Canadalend).
Take Advantage of Second Mortgage Refinancing Starting Today
Fortunately, finding the right lender when refinancing your second mortgage in Ontario can be easy when you choose from our team of experienced and personable private lenders. We at Canadalend.com can provide you with an optimized mortgage solution that is smart and beneficial to your specific circumstances, so you can start breathing a little easier.
To learn more about our mortgage refinancing solutions and financing options, call Canadalend.com at 1-866-I CAN LEND or contact us here.