Condition for Having a Second Mortgage
Thousands of Canadians across the country are enjoying all the benefits that come with taking out a second mortgage. These home loans often have very low interest rates, especially when compared to other very high-interest loans such as credit cards and personal loans. But there’s one question all homeowners have before taking out this type of loan, and that is: what conditions are there for getting a second mortgage? It’s a good question and knowing the answer will definitely make you more prepared to take on that second mortgage. And while there might be a few requirements at different major lenders, there’s really only one condition for having a second mortgage.
The one condition for having a second mortgage that you will not be able to get out of no matter which lender you go to, is that you must have a certain amount of equity in the property you want to take the mortgage out against. Typically property owners will need to have 20% of equity in their home at the time they apply for a second mortgage. This can be less in major cities across Canada, but it can also be more on specialty properties, or specialty mortgages, such as private mortgages.
If you are going to one of the Big Six banks in Canada, or even a second-tier lender, there will be another condition for having a second mortgage, and that is proof of a steady income. Many of the big lenders want to see that you have a steady source of income, as this means that you’ll likely be able to repay the loan. While some lenders may still approve a second mortgage for the self-employed or others who can’t verify their income, it will most likely come with higher interest rates than if the income were verified.
Individuals who are turned down by the big lenders, but still very much want to take out a second mortgage, may find a private mortgage to be a good option. These loans are given out by private lenders or companies and typically, only require equity in the property for loan approval. The amount of equity, as well as the interest rate, can often be higher on private second mortgages, but they can be a great option for homeowners that have run out of answers.
Credit history can be another condition for having a second mortgage, if you’re going to a large lender to obtain one. Poor credit can signify to lenders that you’re a bigger risk than borrowers with good credit and if yours is bad enough, it could prevent you from getting the loan altogether. Again, private lenders typically don’t consider things like credit history, because the only requirement they’re actually concerned with is how much equity you have in the property.
Getting a second mortgage can be a great answer for many homeowners that find they need a little bit of extra cash, or even a lot of it. It’s important to know what conditions you’ll have to meet in order to obtain one though, and that different lenders have different conditions. So you can get the second mortgage that’s really right for you and your own situation.
Bryan J is the author of this article. For more information about Toronto Second Mortgage or Private Mortgage please visit canadianmortgagesinc.ca.
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