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Closing costs are the fees associated with buying a property and are required to close the transaction. Closing costs can include appraisal fees, title insurance, legal fees, taxes, commissions, pre-paid property tax, mortgage insurance, and can even extend to moving expenses and certain upgrades or repairs to the new property.

Buyers need to prepare for these one-time expenses and make sure their budgets reflect more than just the upfront costs.

Let’s take a closer look at the closing costs to help you estimate what you should put aside so that you can mitigate any surprises.

Planning for Closing Costs

You’re always better overestimating what you will need to pay in closing costs. The best advice is to budget around 4% of the purchase price of the property to pay for all the associated closing costs. This number could increase or decrease depending on the size of the home, location, level of legal requirements, among other variables.

Closing Cost Breakdown

Appraisal fee: This fee covers the services provided by the appraiser to assess the market value of the proposed property.

Title Insurance: This type of insurance is mandatory and protects against any fraud or issues with the title of the property.

Lawyer Fees: You will need to contact a lawyer. The fees charged will consist of a title search, prepare the mortgage, drafting the deed. There could be other fees that are specific to your purchase. Typically, lawyer fees for the average home is a minimum of $500 plus taxes.

Utility Adjustments: Prior to closing, the buyer is responsible to reimburse the seller for any prepaid utility charges, or to cover any adjustments. Your lawyer will advise you of these costs.

Mortgage Insurance: This is sometimes not associated with closing costs but it is too often left off budgets. Based on the amount you’re borrowing and your down payment, you might have to insure your mortgage. This can cover the lender in the event of job loss, disability or death.

When calculating your budget for purchasing your next home, make sure to include all closing fees. Even overestimate certain expense like lawyer fees just in case costs come in higher due to unforeseen circumstances.

Many property owners take out a second mortgage in Toronto on their property to unlock the equity they’ve built up in their homes. The idea of taking out two mortgages on the same home might sound daunting, but a second mortgage can make a lot of sense, and when used to pay down or off debt, can actually help you save money. Here are some answers to common questions regarding second mortgages.

What does it mean when you take out a second mortgage?

When you take out a second mortgage, you are taking out an additional loan on a property you already have a mortgage on. Just like the first mortgage, a second mortgage is secured against your property. And, just like a first mortgage, you repay the second mortgage on a monthly basis.

Is refinancing the same as a second mortgage?

Refinancing is not the same as a second mortgage. When you refinance a mortgage, you are applying for a new mortgage all over again. That means getting a new home appraisal, verifying employment, family income, and any debts.

Is a second mortgage and a home equity loan the same thing?

A second mortgage and home equity loan are the same; you are taking out a loan based on your home’s equity. That said, a home equity loan should not be confused with a home equity line of credit (HELOC).

A second mortgage operates like the first mortgage. After being approved, you receive a one-time lump sum payment that is paid off over a set period of time with monthly payments. Like a first mortgage, you are charged interest on the total amount as soon as you receive it.

A HELOC, while also secured against the equity you’ve built up in your home, operates like a revolving line of credit. Money is deposited into an account and you can use as little or as much as you like. You are also only charged interest on the amount you borrow.

How soon can you take out a second mortgage?

You can take out a second mortgage in Toronto as soon as you’ve built up enough equity in your home. What that magic number is will vary depending on what kind of lender you go to. Traditional lenders, like Canada’s big banks will need you to have at least 25% of equity built up in your home. A trust company will want to see equity of between 10% and 15%.

A private lender on the other hand, because they are not bound by the same rules, are a lot more flexible; with a private lender, you can have less than 10% of equity built up in your property.

As for how much you can actually access, with a second mortgage, you can borrow up to 80% of the appraised value of your home, minus the balance on the first mortgage.

How long does it take to get a second mortgage?

Again, it depends on what kind of lender you use. With the big banks or trust companies, it could take a number of days before you find out if you’re approved for a second mortgage.

If you use mortgage experts that have access to private lenders, you can be approved for a second mortgage in less than 24 hours.

What is the interest rate on a second mortgage?

A second mortgage in Toronto operates the same as a first mortgage, but, should you default on your mortgage, the first mortgage gets paid off first; any money left over goes toward the second mortgage.

Because there is more risk for the lender associated with a second mortgage, the interest rates are higher than first mortgages. But, the interest rate with a second mortgage will be a lot lower than other types of loans, this includes, credit cards, car lease payments, and other unsecured lines of credit.

Can you take out a second mortgage with bad credit?

Because there is a lot more risk associated with a second mortgage than a first, it can be difficult to get a second mortgage if you have bad credit (credit scores generally range from 300-900; the higher the better). This is true even if you’ve never missed a mortgage payment.

The big banks don’t like approving second mortgages if you have bad credit and will want to see a credit score of 650-900. Trust companies won’t sign on the dotted line unless your credit score is in the 550-700 range.

Private lenders though, because they are not bound by the same rules, will give you a second mortgage even if your credit score is less than 600.

Is it a good idea to remortgage to pay off debt?

Taking out a second mortgage in Toronto is a great way to pay off your debts. That’s because the interest on a second mortgage, while higher than the primary mortgage, is significantly lower than the interest charged by major credit cards and store credit cards. It’s also lower than interest charged on car leases and unsecured lines of credit.

Moreover, using a second mortgage to pay off your debt will help improve your credit score. This in turn, will mean you can apply for other financial products with even better terms and conditions.

What can you do with a second mortgage?

You can use your second mortgage for anything. You can pay off debt, buy a second home, pay for unexpected expenses, school tuition, the stock market, a wedding…anything!

How can Canadalend.com help you?

Second mortgages are an excellent way to tap the equity in your home to pay off debt. Unfortunately, stricter lending rules mean the big banks and trust companies are turning away more and more homeowners because they haven’t built up enough equity, have bad credit, or earn enough. Canadalend.com though makes it easy for homeowners to get a second mortgage.

How does Canadalend.com do it? The independent, licensed mortgage experts at Canadalend.com work with hundreds of different private lenders.

If you are interested in finding out what kind of second mortgage you qualify for contact Canadalend.com today or apply online and a Canadalend.com mortgage specialist will set up an appointment at your earliest convenience.

Below are some of the top Frequently Asked Questions about second mortgages.

What is a second mortgage?

A second mortgage, also called a home equity loan, is an additional loan (you can also get a third mortgage etc.) taken out on a property you already have a mortgage on. Just like the first mortgage, a second mortgage is secured against your property.

Is a home equity line of credit the same as a second mortgage?

A home equity line of credit and home equity loan (or second mortgage) sound alike but they are very different financial products. A second mortgage operates like a mortgage. After being approved for a second loan, the lender will send you a one-time lump sum payment that, like the first mortgage, gets paid off over a predetermined time period with monthly payments. Just like the first mortgage, with a second mortgage, you are charged interest on the total amount as soon as you receive it.

A home equity line of credit (or HELOC) is also secured against the equity you’ve built up in your property, but it is more like a revolving line of credit. The money is deposited into an account and you can take out as little or as much as you like. You are only charged interest on the amount you borrow. You also cannot borrow as much with a HELOC and the qualifying requirements can be quite strict.

What is the credit limit with a second mortgage?

You have to have a certain amount of equity built up in your property to get a second mortgage. Exactly how much depends on who the lender is. With the major banks, you need to have at least 25% equity built up in your home; trust companies like to see equity of 10% to 15%; and for private lenders, you can have less than 10% equity. You can borrow up to 80% of the appraised value of your home, minus the balance on the first mortgage.

What is the interest rate for a second mortgage?

The interest rate on a second mortgage can be either fixed or variable. Whether it fluctuates or is fixed, one thing is certain, the interest on a second mortgage will be higher than on the first mortgage. But, the interest rate will be a lot lower than other types of loans, including credit cards, car lease payments, and unsecured lines of credit.

What can I use a second mortgage for?

You can essentially use your second mortgage for anything you like. The sky’s the limit. This includes buying land as an investment or to build on. You can also use your second mortgage to pay for unexpected expenses, a wedding, school tuition, the stock market, purchase a second home…anything! In fact, a second mortgage is a great way for homeowners to consolidate their debt.

Can I get a second mortgage with bad credit?

You’d think that if you had a mortgage and were making your payments on time it would be easy to get a second mortgage. Unfortunately, it’s not. There is a lot more risk associated with a second mortgage than with the first. If you default on your payments and the property is foreclosed, the lender who holds the primary mortgage is paid out first. The lender who helped you secure a second mortgage runs the risk of not getting paid out in full. To compensate, the lender charges higher interest rates than what you pay on the principle mortgage.

Because of this added risk, lenders don’t like handing out second mortgages to those with bad credit. Canada’s major banks want to see a credit score in the 650-900 range and trust companies want to see a credit score 550-700. Private lenders though, because they do not need to follow the same federal rules as traditional lenders, will give you a second mortgage even if your credit score is less than 600.

Is it difficult to get a second mortgage?

Lenders look at a number of different factors when determining whether or not you deserve a second mortgage.

Equity: The more equity you have built up the better your chances of getting a second mortgage. Again, that only applies if you use a big bank or trust company. Private lenders are not bound by the same strict lending rules.

Income: Big banks and trust companies want to make sure you have enough income to make the payments on your second mortgage. Makes sense. Unless you’re self-employed or an entrepreneur and have unreliable income, or, for tax purposes, draw a small income. The bank only cares about the bottom line and simply decides there’s a greater chance you’ll default on the second mortgage.

Credit Score: The higher the credit score, the lower the interest rates.

Property: Because a second mortgage is secured to the property, lenders want to see what kind of property they are investing in. A bank might not give you a second mortgage if they don’t like the property.

What are the risks associated with a second mortgage?

The biggest risk associated with applying for a second mortgage is the possibility of foreclosure. If you run into trouble paying back the first or second mortgage, your home is at risk of being foreclosed. A private, licensed mortgage broker can help you analyze the risks of taking out a second mortgage.

Canadalend.com, Helping You Secure a Second Mortgage

Stricter lending rules mean big banks and trust companies want to make sure you have a lot of equity built up in the property, high income, high credit score, and as much documentation as possible. Canadalend.com simplifies the process, making it easier for you to get a second mortgage.

How can we provide better service than the big banks, trust companies, and other private lenders? The independent, licensed mortgage experts at Canadalend.com work with hundreds of different private lenders. Many of whom specialize in helping those who are self-employed, have unreliable income, or have poor credit secure a second mortgage.

If you are interested in finding out what kind of second mortgage you qualify for, contact Canadalend.com today or apply online and a Canadalend.com mortgage specialist will set up an appointment at your earliest convenience.

Most people who buy a home in the Greater Toronto Area don’t have enough money saved up to pay it off up front. That’s why the vast majority of people need a mortgage in Ontario. With a mortgage, you borrow an agreed upon amount of money for a set period of time. Most Canadians get a mortgage with an amortization period of 25 years and a mortgage term of five years. What that means is that it will take 25 years to pay the mortgage off in full, and the current mortgage conditions lasts for five years.

What Are Your End of Mortgage Term Options?

When your mortgage term comes to an end, you have two options, renew with your current lender or renew with a new lender. It’s an important decision to make, and it could end up saving or costing you thousands of dollars in interest payments. That’s why you should never just let your mortgage automatically renew.

More than a quarter (27%) of Canadians with mortgage terms coming up for renewal allow their mortgages to renew automatically, meaning they miss out on any and every opportunity to save money.

Renewing Your Mortgage Term with Your Current Lender

Before deciding on what you should do, you need to sit down and reassess your financial situation and financial needs. If you’re thinking of renewing with your current lender, determine what the interest rate will be and if you want to increase your mortgage payments to save on interest. You might also want to find out if you can consolidate other debt you might have into your new mortgage term.

Renewing Your Mortgage Term with a New Lender

You may have gotten a mortgage with one particular lender, but it’s important to remember, you’re in control of your mortgage at renewal time. If you’re not happy with the bank or current lender, find a lender you are going to be happy with.

Find a lender that offers the rates and conditions that best suit your needs. Keep in mind, when you renew with a new lender you’ll need to approve your application, just like the bank did when it gave you your first mortgage.

At the same time, just because you get a first mortgage doesn’t mean you’ll automatically qualify when you renew with a new lender. It’s possible your financial situation has changed; perhaps you have more debt, make less money than before, or your credit rating has been hit.

New lenders might think you’re too much at risk for defaulting and not give you a mortgage. Most people think they are stuck with their current lender. They’re not. There are a large number of private mortgage lenders in Toronto that specialize in helping homeowners who have been turned down by traditional lenders renew their mortgage term.

When to Start Thinking about Renewing Your Mortgage

Start looking for different rates and terms when there’s around 120 left before the mortgage term ends. Rate guarantees, with traditional banks, means you will get their lowest rate for a set period of time, typically 90 to 120 days. If the rate goes down during that period, you automatically get the best rate.

That said, private lenders might be able to give you a rate guarantee that’s better than the big banks. Staying on top of the end of mortgage term date and knowing your options could end up saving you thousands of dollars over the life of the mortgage.

Canadalend.com, Helping Canadians with End of Mortgage Terms

Before renegotiating or renewing with a new lender, you should consult a mortgage expert at Canadalend.com to determine which is right for you.

The licensed mortgage professionals at Canadalend.com can help you renew your end of mortgage with a new lender or help you break the end of mortgage term early. Why use Canadalend.com? The mortgage specialists at Canadalend.com are independent, which means we have access to hundreds of different lenders; lenders that can help you renew a mortgage at the best rates and terms.

They can also help you find a private lender willing to renew a mortgage if you’ve been turned down by one of the big banks or trust companies.

If your mortgage end of term is coming up or you want to find out what kind of mortgage you qualify for, contact Canadalend.com today or apply online and a Canadalend.com mortgage specialist will set up an appointment at your earliest convenience.