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You probably have lots of ideas for what you could do if you had more money to spend. You could renovate your home, pay off high-interest loans, plan for retirement, invest, or do anything else.

Looking at the equity you have built in your home is a common way to get the cash you need. Second mortgages are a fantastic option for many people, and this article will help you better understand how a second mortgage can be right for you.

Like with all mortgages, there is a lot to consider. We want you to understand what a second mortgage is, how it differs from your first mortgage, when you should (and should not) consider a second mortgage, and how to assess your eligibility.

1. Understanding Second Mortgages

Understanding a great deal about obtaining a second mortgage is important, and this article is an excellent place to start.

You should know that a second mortgage differs from your first mortgage and when you should/should not begin a second mortgage. We will also introduce you to some common concepts that we use when discussing a second mortgage.

Second mortgages are just that, a second loan taken out against the equity in your home on top of your pre-existing mortgage. It is a way to access the equity you have built in your home and borrow money to invest, consolidate your debt, or save in an emergency fund.

At the outset, an essential thing you should understand about second mortgages is that they typically hold a subordinate position to your first mortgage. This facet means that the repayment priority goes to your first lender.

Second mortgages often come with higher interest rates (but that is not guaranteed). They are a great option in certain circumstances, but only on some occasions, so it's essential to know the specific use cases where a second mortgage is best for you.

2. Difference From Your First Mortgage

Your first mortgage is the primary loan you used to purchase your home or property. These mortgages often have a repayment period of 15 to 30 years. To repay the loan used in the purchase, you pay a monthly fee that covers both the principal and the interest.

Second mortgages usually have a shorter repayment (especially compared to your first mortgage). Rather than the borrowed amount being used for the entire purchase price of the property, the amount you can borrow is dictated by the amount of equity you have. To learn more about second mortgages, you can read our article here.

The main difference between a first and second mortgage is the purpose of the loan. A first mortgage is a loan for purchasing your property. In contrast, a second mortgage allows you to extract some of the equity in your home to put towards anything you like.

Since these are two separate mortgages, you will have to manage two separate monthly payments, so it's worth considering if you can do that beforehand.

3. Know When (And When Not) to Get a Second Mortgage

Depending on your circumstances, a second mortgage could be an excellent decision. Second mortgages are a great way to get money for investments, debt consolidation, home improvements, emergency funds, planning for retirement, or anything else you may need.

One of the great things about a second mortgage is that you can do anything with the money. While there is potential for lower interest rates than other types of loans, second mortgages are based on your credit score, equity in your home, and other variable factors.

Two primary types of second mortgages are a Home Equity Loan and a Home Equity Line of Credit (HELOC). These two methods offer flexibility in how you receive money from the equity you have in your home. A Home Equity Loan is a one-time lump sum payment.

A Home Equity Line of Credit allows you to take out the money as you need, and as you pay it off, you can borrow more money (up to the limit), much like a credit card.

Of course, you need to understand that the interest rates on your second mortgage will likely be higher than your first mortgage. You must also manage two mortgage payments instead of the original one. Therefore, before taking out a second mortgage, you should seriously consider the pros and cons of repayment.

4. Eligibility

To be eligible for a second mortgage, you must meet your lender's requirements. These usually include the lender looking at your credit score (the higher, the better), the equity you hold in your home (also the higher, the better), and your Loan To Value (LTV) Ratio (the ratio between your mortgage amount and the appraised value of your property).

Canadalend has access to Canadian banks, credit unions, and other lenders, so we can ensure you get the best and most competitive rates on the market. Our friendly and professional agents thoroughly understand all products, rates, and features of the financial tools available to you.

5. Seek Professional Advice

Creating a second mortgage can be a great way to get the money you need. Yet, you must carefully consider all variables to ensure this is your right choice. We have already discussed some of a second mortgage's pros, cons, and complexities. What you need is professional guidance from people you trust.

We are committed to finding you the best home equity loan to fit your needs. We offer great rates and 24-hour approvals. Our team of licensed mortgage professionals will help you every step of the way- even offering you a free personal consultation.

For more information about second mortgages (and alternatives), call Canadalend at 1-844-586-0713 or contact us here.

You could consider taking out a second mortgage in Canada for many reasons. You can buy a summer home or expand your real estate portfolio. Whatever the case, learning about the stipulations of getting a second mortgage is essential. 

As you will find out in this article, taking out a second mortgage differs significantly from a primary mortgage loan transaction. This guide will lay down all the facts to help you make the best decision. 

What Exactly is a Second Mortgage?

Taking out a second mortgage means applying for a second loan on a mortgaged property. A second mortgage usually counts as a home equity loan for another residence or a home equity line of credit (HELOC) on an existing property. 

Simply put, you can use a second mortgage to buy another home or cash out the equity you have in your existing home to pay for something else. Typically, homeowners take out a second mortgage for the following reasons:

• Consolidate their existing debts

• Afford significant home improvement purchases

• Fund a down payment for a second home

If you take out a second mortgage, your lender will likely raise your interest rate and lower your borrowing amount compared to your existing mortgage. 

What Are the Different Types of Second Mortgages?

Again, you can get a second mortgage as a HELOC. The usual conditions are having good credit, an existing mortgage, and at least 20% equity in your primary residence. If you meet these prerequisites, your lender will extend a loan you can use when needed. 

You can take out a second mortgage as a HELOC to pay down existing credit card debt, buy a restaurant, or even pay off your student loans. A HELOC is the most common type of second mortgage, and many lenders across Canada provide this option to homeowners. 

Remember that your interest rate can hover between 2.5 – 3%, and you must pay the money back according to the terms set by the lender. In this instance, think of a second mortgage like a credit card.

The next type of second mortgage is called a home equity loan. When you take out a home equity loan, you'll essentially agree to pay the money back in monthly instalments, just like your primary mortgage. 

Home equity loans are widely accessible to homeowners, even with poor credit or little home equity. However, the downside is that private lenders usually finance these loans at very high-interest rates, between 10 to 15%.

Both types of second mortgages use your home's equity as collateral if you default on the loan. It means your lender could repossess your home if you don't pay back the money you owe. 

Why Take Out a Second Mortgage?

You can use a second mortgage to fund any significant purchase within the terms of your loan. Still, here are the four most common reasons why people seek to take out a second mortgage:

1. Debt Consolidation: Due to its high borrowing amount, you can use a second mortgage loan to consolidate and pay off your debts. You can lump together high-interest debts like credit cards and student loans to pay them all off with moderate interest.

2. Major Home Purchases: If you want to remodel your home, you can use a second mortgage loan to fund the project. It's essential to ensure that your home's value exceeds the money you're borrowing to make a profit.

3. Starting a Business: Applying for a second mortgage loan is usually the easiest way to start a business. Many lenders will even give you generous term conditions that will allow you to repay the loan when you start making a profit.

4. Purchasing a Second Home: Finally, you can use a second mortgage to fund a down payment for a second home. Most of the time, a down payment is 20% of a home's total value. Once approved, you'll repay the loan in monthly instalments plus interest. 

How Much Can I Borrow with a Second Mortgage?

According to the Canadian government, you can borrow up to 80% of the total value of your home once you subtract the current balance on your first mortgage. For example, if you own a home worth 200,000 CAD, you could borrow up to 160,000 CAD on your second mortgage. 

Nonetheless, the average borrowing limit for second mortgages for a HELOC is 150,000 CAD. You can bypass this amount by borrowing from a private lender. However, expect to pay a high-interest rate if you choose that option. 

How to Qualify for a Second Mortgage

While every lender is different, all of them will assess your financial worthiness using the three following criteria:

1. Equity: The total amount of money you've already paid on your mortgage loan. It's simply the percentage of the home you own. The more equity you have, the more collateral you can use toward your second mortgage. Generally, you can qualify for a home equity loan with under 20% equity. You can qualify for a HELOC if your equity is above 20%.

2. Income: Your lender will assess your income to ensure you can keep up with the payments of your additional mortgage. Debt will also play a factor here since the lender wants to ensure you can manage new debt on top of your primary mortgage.

3. Credit: If you have a credit score of at least 650, you can qualify for a second mortgage. The better your credit, the lower your interest rate will be.

Get Help with Home Equity Loans with Canadalend

As you can see, taking out a second mortgage can be used to make emergency payments or fund a significant purchase whenever needed. Depending on your lender, you can apply for a home equity loan with favourable terms that will give you peace of mind.

If you're ready to explore your options, the friendly team at Canadalend will help you choose a suitable lender. 

To learn more about our home equity loan solutions, call Canadalend.com at 1-866-I CAN LEND or contact us here.

If you’re considering buying a second home in Ontario, you’re not alone. A recent survey concluded that more than 10% of Canadians have purchased a second home.

Participating in this growing trend is usually complicated if you don’t know the rules for second mortgages in Ontario. The good news is that you should consider only five main things before purchasing a second home.

In this post, we’ll explain these factors to help you make an informed purchase before choosing a lender.

1. Will You Use Your Primary Home’s Equity

Unless you have a high net worth, raising the capital to buy a second home will require a great deal of financial maneuvering. One way to raise the cash to buy a second home is by accessing the equity in your primary residence.

Suppose you plan on using your existing home equity to finance a second home. In that case, you should know that this process will involve a cash-out refinancing of your current home mortgage. Ultimately, you will have to take out a higher borrowed amount than before.

The upside of using your home equity to fund a second home is that you can bypass spending several years saving up toward the purchase. Also, depending on how much equity you have in your primary home, you can present a suitable financial profile to your lender to increase your chances of approval.

Make sure to speak to a mortgage professional to see if this choice is best for you.

2. Understand What Counts as a Second Home

Not every additional residential purchase counts as a “second home.” Typically, a second home refers to an owner-occupied property, at least for some time during the year. As a result, a second home could be a:

• Winter cottage for family get-togethers
• Summer vacation home
• Condo for long commutes to work
• An apartment complex that the owner lives in and rents to tenants

If you’re considering buying a second home in Ontario, your lender will mainly be concerned with whether or not you occupy the property. Lenders will classify it as an investment property if you don’t plan on living at the residence.

Some smaller lenders don’t provide mortgage loans for investment properties. Therefore, you should make this distinction early on before calling a mortgage lender.

3. Know the Rules

If you own a home, chances are you’re already familiar with the qualifying criteria for securing a home loan. This familiarity is because the requirements for owning a second or third home are similar to buying your primary residence.

These requirements are:

• You must qualify for a mortgage loan under the stress test
• You’ll need a good credit score for the lowest mortgage rates
• Borrowers must have an acceptable debt-to-income ratio with their lender

There is one difference you should be aware of, and that is the down payment. When you buy a primary residence, your down payment is tied into the total purchase price. However, buying an additional property means the following can affect your down payment amount:

• The size of the property
• The number of units the property has
• Whether or not the owner plans to live there

As you can see, the criteria for qualifying for a second home aren’t much different from your original purchase.

4. How Do You Plan to Finance

We’ve already covered that you can use the equity in your primary residence to fund the purchase of a second home. There is good news if you don’t have much home equity or want to assess other alternatives.

Buying a second home in Ontario can qualify you for the Insured Second Home Mortgage Program. Many Canadian homeowners enroll in this program and pay as little as 5% down for a property occupied by a family member going to college.

This program is also a popular alternative for purchasing a vacation home. Before enrolling in the Insured Second Home Mortgage Program, here are some things to keep in mind:

• The borrower must live in the property for some part of the year, or a family member can occupy the home. Under the guidelines of this program, you can’t charge a relative rent for occupying your home.
• The property you purchase must be accessible all year round. This factor means you’re responsible for winterizing your home and performing routine maintenance.
• Your second home must be located in Canada. You can’t use this program to buy timeshares or similar real estate.

5. Can You Afford a Second Home?

Understanding the rules of buying a second home in Ontario is very straightforward. Before any of that can matter, you must decide whether or not you can even afford the purchase.

A mortgage lender will evaluate your financial profile unless you have the funds to buy a second home outright. They will deeply examine your income, credit score, gross debt service (GDS) ratio, and total debt service (TDS) ratio.

Suppose you plan on buying a second home to add to your investment portfolio. In that case, your lender may count that anticipated revenue toward your gross income. This facet can substantially increase the amount you can borrow from a mortgage lender.

The most crucial aspect of affording a second home is the interest rate. An exorbitant interest rate could leave you stuck paying for a second home many years after you finish your first mortgage.

Ready to Take Out a Second Mortgage?

Buying a second home in Ontario is possible if your finances are in order and you agree to the purchase rules. Finding the right lender is crucial if you’re strongly considering making this choice.

At Canadalend.com, we help our customers thoroughly assess their options to take advantage of the most competitive mortgage rates. To learn more about our second mortgage and financing options, call Canadalend.com at 1-866-I CAN LEND or contact us here.

Finding the right property is one of the most essential steps in running a new business. If you’re like most business owners, the most straightforward route to securing a property is taking out a commercial mortgage.

The problem with this approach is that not all lenders are willing to extend a mortgage on your terms. For this reason, many business owners work with commercial mortgage brokers in Toronto.

A commercial mortgage broker is the “middleman,” which connects you (the borrower) to the right lender. In this post, we’ll explain how you can find the best commercial mortgage broker that meets your standards.

Research Your Options

All commercial mortgage brokers in Toronto have different clientele they work with. Some mortgage brokers deal in certain areas in Toronto. Others may prefer to work with borrowers with good credit and suitable collateral.

For this reason, you should do your research to find a Toronto commercial mortgage broker that works with people like you. Here are some helpful tips to help you get started:

• Visit a Mortgage Broker’s Website and Check Their About page. This page is where you’ll usually see information about the customers they work with.

• Use Google Maps. This helpful tool will display some local commercial mortgage brokers in your area.

• Check the Better Business Bureau (BBB). This online resource helps consumers filter through legitimate businesses and fraudulent establishments with horrible reviews.

Once you follow these tips, you can create a shortlist full of possible commercial mortgage brokers to contact.

Consider a Broker’s Relationships with Different Lenders

Successful commercial mortgage brokers in Toronto work with a wide range of lenders. This range ensures their customers have plenty of quality options when securing a favourable mortgage loan.

When meeting with a prospective commercial mortgage broker, ask them to give you a full rundown of the lenders they work with. A quality mortgage broker will have connections with prominent and local lenders to provide you with a broader list of options.

Always Collect and Verify References

A significant aspect of working with any business is ensuring they are who they claim to be. When contacting a prospective mortgage broker, ask for at least three professional references to elevate your peace of mind.

However, your job doesn’t just stop there. In addition to collecting references, you should also verify each contact by sending an email or calling a past customer on the phone. Verifying references generally takes less than an hour, which can ease your mind by knowing you’re working with a legitimate business.

Make Sure They Understand Your Target Area

The job of a commercial mortgage broker isn’t just to connect you with the right lender. Great commercial mortgage brokers in Toronto will research and understand the area you want to buy in. They’ll have a firm grasp of average sales prices, interest rates, and regional crime rates. When meeting a mortgage broker, look for a professional that does their due diligence.

Ask Plenty of Questions

Whether you speak to a representative over the phone or meet a mortgage broker in person, asking vital questions will help you determine the best fit. Here are some questions you can ask:

• How long have you been working in this region?
• How many clients have you helped secure a commercial mortgage?
• What are your fees? Are you going to bill me or my lender?
• Are there any other fees that I should know about?
• What other services do you offer?
• What do I need to provide to get started?

Asking these questions and recording their answers will help you compare each broker on your shortlist.

Meet the Broker in Person

Don’t underestimate the importance of an in-person meeting. Meeting a commercial mortgage broker in person gives you the opportunity to:

• Ask follow-up questions that you forgot about comparing different brokers.
• Get a great idea of what it’ll be like to work with them.
• Ask about the additional services you may need in the future.
• See how attentive the mortgage broker is to your concerns.

The best commercial mortgage brokers in Toronto are friendly and transparent. They won’t upsell you on other services to make a profit and will be honest about the lending process.

Determine Your Priorities

Before selecting a broker, deciding what matters most to you during your lending experience is always a great idea. If you want to pay the lowest rates possible, talk to a mortgage broker with a proven track record of securing the best deals for their customers.

If you’re a first-time buyer who requires a more hands-on approach during the lending process, find a friendly broker to accommodate you.

Finally, if you prefer to get through the lending process as soon as possible, choose an efficient broker known for expedited service.

Monitor Their Reputation

The final step in choosing an excellent commercial mortgage broker is gauging their online reputation. Mainly, what do their online reviews look like? Have you had any dissatisfied customers on Google Maps and other review websites?

Does the mortgage broker have an excellent reputation on social media platforms like Facebook and LinkedIn? It would help to answer these questions when monitoring a broker’s online reputation. A mortgage broker with a dirty online reputation on social media and review websites isn’t a provider you want to do business with.

Ready to Start a Commercial Mortgage?

As you can see, choosing one of the best commercial mortgage brokers in Toronto doesn’t have to be a complex process.

Performing your due diligence, asking essential questions, and scheduling an in-person meeting are some of the best ways to vet quality brokers. If you’re ready to discuss starting a new commercial mortgage, the friendly team at Canadalend.com is here for you.

To learn more about our commercial mortgage solutions and financing options, call Canadalend.com at 1-866-I CAN LEND or contact us here.