|
Second mortgage is worth a
second look
In the past, second mortgages were
associated with high rates and restrictive
terms. Only those really in debt need a
second mortgage – right? Not
necessarily. Chuck your old ideas; a
second mortgage is worth a second look.
Second mortgages are getting increased
attention these days – as historically low
rates and rising house prices combine to
make borrowing against your home one of
the favourite financial strategies of the
year.
There are a couple of strong reasons to
consider a second mortgage. Many
homeowners, for example, are taking
advantage of the increased value of their
homes to “buy up” and get the house of
their dreams. Now, consider that many
homeowners across the country received
excellent rates on their mortgages over
the last few years. Without a second
mortgage, the prospect of changing houses
could mean the loss of a great-rate first
mortgage for these homeowners. But
instead, the homeowner can carry their
great rate with them when they move – and
“top up” their borrowing needs with one of
the attractively priced second mortgages
available right now.
For homeowners who are buying up, then, a
second mortgage can be an excellent
financial strategy.
But homeowners who are staying put can
also benefit from a second mortgage. For
any Canadian with debts outside their
current mortgage, a second mortgage can be
a top-notch debt reduction strategy. A
majority of Canadians carry some consumer
debt – a car loan, say… or a loan taken
out for renovations or university/college
education. For some, the situation is even
more dire. A growing number of Canadians
are staggering under consumer debt: with
persistent credit card balances that seem
impossible to eliminate. Dig out your loan
agreement or your last credit card
statement and take a look at the interest
rate you’re being charged for borrowing.
If it’s higher than the rate available for
a second mortgage – and you have some
equity in your home – then you have an
option to consider for your debt
management. We should point out that this
is not the same as having a solution to
overspending… but consolidating your debt
in a low-interest mortgage can sure speed
the path to financial recovery!
Finally, it’s worth taking a look at the
first-time homebuyer who may need more
than the 75% of the home’s value they can
get from a conventional first mortgage.
The typical route they take is a high
ratio mortgage in which the mortgage
insurance premiums are amortized over the
life of the mortgage, even if they are
able to quickly pay off the amount over
75%, or the value of their home increases
over that 75% loan to value ratio. They
may be better off choosing a conventional
mortgage, while securing an attractive
second mortgage that enables them to pay
off the additional funds as quickly as
they like.
Second mortgages have long been associated
with unexpected debt – and they remain a
great strategy for managing extra
expenses. Entrepreneurs and the
self-employed, for example, can accumulate
tax liabilities that exceed estimates. And
many parents decide to tap into their home
equity to help contribute to education
expenses for their children.
An independent mortgage professional can
help you access a broad range of lenders
and find the mortgage rates and features
that meet your needs. Whether you’re
moving up the house ladder, moving out a
student or just sweeping out the debt -- a
second mortgage is just one more
financial tool at your disposal.
Top |
