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Everything You Need to Know About Second Mortgages

If a second mortgage is what you need, there is no reason to be ashamed of it. There are several reasons why you might need that money, perhaps you wish to return to school, or you need to pay back some credit cards that have been stressing you out for some time. If not, then perhaps you wish to repair your home to make it more livable for your family and increase its property value down the line.

You might want to consider taking advantage of your existing property's home equity which is more significant than any cash you might have access to. This post will take a close look at second mortgages and just how you can use them for your rainy day.

What is a Second Mortgage?

Before we discuss how it can help you, we must first discover what it is. It is essentially a loan taken out against a home you own. You must already pay this property’s mortgage to qualify for a second mortgage. The good thing about second mortgages is that lenders typically offer a much lower interest rate desirable by applicants of a second mortgage.

Home Equity

Your home equity decides just how much you can get in a second mortgage on your home. It’s not hard to calculate your home equity. All you must do is subtract what you have already paid towards the purchase price of your home out of the total amount that you have borrowed.

Suppose your home is worth $200,000, and you have paid approximately $60,000 in down-payment. That means the $60,000 that you have paid is your home equity.

How Second Mortgages Work

You may have accumulated equity on your home, but you can’t do much with it. The requirements for you to qualify for a second mortgage may vary from lender to lender, but the gist of it is that you must have some home equity accumulated that you can leverage for the loan. You must be mindful that you will not be able to borrow your total equity amount but instead about 20% of it.

To qualify for a second mortgage, try to ensure that your debt-to-income (DTI) is lower than 43%.

A second mortgage is not the same thing as refinancing. It is simply another mortgage that you must pay back, in the same manner you paid back your first or paid back a portion of it.

There are a few kinds of second mortgages to choose from.

  1. Home Equity Loans
  2. Home Equity Line of Credits

If you wish to find out more, contact Kyle Adams of Adam’s Mortgage Team now at kyle.adams@ontariolendingsolutions.com .

 

 




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