If you already have a property with a mortgage that you got during your initial purchase of this home, it may be possible to get a second mortgage on this property. This type of finance allows you to secure additional credit so you can repay as a second priority to the existing mortgage payments you are making on your home.
If you take out a second mortgage, you will generally be given a lump sum payment that is determined based on the amount of home equity that you have (the amount of your house that you have already paid off), as a lien is taken out against this portion of your home.
Similar to your first mortgage, it will be up to you to pay off this second mortgage with monthly payments over an agreed-upon period of time. Your payments will cover both the return of the loan and the accrued interest.
How can you get a second mortgage?
When securing a second mortgage, a few things are needed before applying. One of the most important factors is that you have a sufficient amount of equity in your home, as the loans will be borrowed against this equity, and it will act as collateral for your second mortgage.
Most lenders will require that your house is officially appraised first to determine the current value of your equity in it. They will allow you to borrow up to 80% of your home equity for a second mortgage, but you may not qualify for such a loan if you have less than 15%-20% equity in your home.
Another important factor that will be assessed when applying for a second mortgage is your credit score. Most lenders have a minimum cutoff of anywhere from 620 to 680. If your score is below these figures, you likely will not qualify for a second mortgage.
In addition, you need to prove that you can repay your second mortgage payments by providing documentation such as proof of your income.
Is it a good idea to use a second mortgage to pay off your debt?
There are a number of different reasons why people are drawn to the idea of applying for a second mortgage. These include their desire to borrow money to make a larger purchase, to do expensive home renovations, or even to purchase a second property.
However, one of the most common reasons people apply for a second mortgage is to pay off their debts. A second mortgage can be used to repay most kinds of unsecured debt, including credit card debt, personal loans, and tax debt.
Although this motivation for second mortgage applications is extremely widespread, some people still question whether it is a good idea or not to pay off their debt.
In reality, receiving a lump sum from a second mortgage can be incredibly useful in particular situations. For instance, when your debt carries an exceptionally high interest rate, using your second mortgage to get rid of this debt could end up saving you a significant amount of money in the long run.
Although the interest rates you will be offered for a second mortgage are generally higher than for a first mortgage, these rates are often still much lower than credit card debt (for example). This means that you will be throwing less money away in interest payments on a monthly basis after paying off your existing unsecured debts.
In addition to saving you money in interest, most second mortgages will also allow you to consolidate your debts. Thus, you can combine them all into one place to make it significantly easier and more convenient to pay them off, as you will not have to worry about juggling multiple bills and payments each month.
What is the main risk of using a second mortgage to pay off debt?
Although taking out a second mortgage on your home has many potential benefits (especially if you use that loan to pay off debts), there are also certain risks of such a loan that must be considered before deciding whether to apply for one.
The biggest danger to keep in mind is that since this loan involves a lien against your property, if you fail to keep up with the second mortgage payments, your house will be at risk of foreclosure.
This is definitely not a situation that you want to find yourself in. This is why lenders typically go through a thorough qualification process to ensure you can afford your payments.
Fortunately, if your finances are in order, you have a steady income, and you stay on top of your first and second mortgage payments, you will never have to worry about facing foreclosure.
How Canadalend Can Help You Secure a Second Mortgage to Pay Off Your Debt
If you are looking to pay off your existing debts, or there is another reason why you feel a second mortgage could be financially beneficial, Canadalend can help you get the loan you are seeking.
We have a wide range of solutions for various second mortgage needs and the capacity to fine-tune our services to specifically meet your financial requirements.
One of our lending specialists would be happy to sit down with you for a free consultation so that you can look over your mortgage options and find the best possible solution for your situation.
We make high-quality customer service our top priority and will go out of our way to do everything we can to satisfy your individual needs throughout this process. Whether you have questions that need answers immediately or simply need some guidance in the right direction, we will be there every step of the way.
We also make the application process for a second mortgage as efficient and streamlined as possible for a smoother experience.
For more information about how we can help you secure a second mortgage or schedule a free personal consultation with one of our lending specialists, call Canadalend at 1-844-586-0713 or contact us here.
