If you live in Canada and are in need of some extra cash for whatever reason, you may want to look into a second mortgage. A second mortgage is nothing more than another loan on your property. The only reason it is known as a second mortgage is that you already have a home loan on the property to pay for the original loan to purchase the home. The second mortgage uses the home as collateral for the loan, however, it is not the priority loan, which means if you default on the loan, and the first mortgage will be paid off first before the second mortgage in the case of a foreclosure.
There are times when a second mortgage can be beneficial especially if you are in need of a large sum of money and have equity in your home. A lender will be more apt to give you a loan as it will be safer for the lender as the home will be the collateral.
The most common reasons that families obtain a second mortgage include improvements around the home, to avoid private mortgage insurance, to purchase another home, consolidate debt, and to create a home equity line of credit.
Of course, with any loan there are a few disadvantages with the largest one for a second mortgage being you are placing your home at risk. If you cannot pay back the mortgage, the lender will be able to foreclosure on your home in order to resell and receive the money you owe on your mortgage loan.
One more con is that in most cases, second mortgages have higher interest rates due to the fact that this loan will not be paid back until the first one, in the case of a default on the loan. This means that the second mortgage loan is a bit more risky than the first. On the other hand, getting a second mortgage may have lower interest rates that obtaining a personal loan or using your credit cards.
Second mortgage loans often come with all kinds of fees and services unlike the original loan. These fees are dependent on the amount of money you need to borrow and how long you need to repay the loan.
Finding a second mortgage is not that difficult as most lenders will provide this service. It is recommended that you begin with the lending company that has your original loan; however, you should still compare other lending companies to ensure you are getting the best interest rates. In some cases, your original lender may even charge less fees but it is still best to do your homework.
You should receive quotes from various lending institutions such as your original lender, a Burlington mortgage broker, and an online lender as examples.