Maybe its time to get a 2nd mortgage

There are many reasons why you might consider getting a second mortgage. Yes, the rates are usually higher than 1st mortgages offered by banks but there is legitimate reason for that. The risk is higher for the 2nd mortgage lender. They are in second position on title, behind the first. The risk is higher so they need to charge more interest for the money. Maybe you have a house with two bedrooms and you discover you are about to have another child. Maybe cousin Al or grandma will be moving in. Whatever the reason, your current home is too small and you now need to upgrade to a bigger home. Well, you marvellously negotiated a great rate last mortgage renewal time and you’d like to keep that rate for the new, bigger home. You could port the existing mortgage to the new place and get a second mortgage for the difference.

Note – you will want to do some math here and calculate the cost difference between paying a first and second mortgage to just getting a singular bigger mortgage. You will need the exact numbers and be accurate. A reliable mortgage broker can help you with this. You want the best affordable money you can get. Don’t assume, take some time to figure it out and don’t forget to account for any mortgage payout penalties you might have to satisfy should you decide to get a new, bigger mortgage. The difference can be thousands of dollars in savings.

First time home buyer can also use 2nd mortgages effectively. Instead of getting a high ratio first mortgage insured through CMHC, GE or others and paying the associated fees, they can get a conventional 1st mortgage along with a second mortgage to the loan to value they need. They should calculate the cost of financing before doing this to compare the expenses of each. Remember that mortgage insurance fees are usually capitalized into the home loan and with that, the fees end up being paid over the life of the loan. Figure in the interest rate over 25 or 30 years and well, let’s just say it adds up big time. It might well make sense to get a second mortgage for the shortfall and pay the darn thing off as soon as possible. Do the math.

Another very good use for a 2nd mortgage is to consolidate debt. Think about it, how much credit do you have right now that’s at 20, 25 percent interest? Student loans, furniture loans, car loans and credit cards can all be at very high interest rates. A second mortgage at 12 percent makes a lot of sense as you can use the additional moneys you were spending on the credit cards every month towards the 2nd mortgage. You will pay off the debts much faster. That is a key to wealth, get rid of bad debt, and debt at 20 percent is bad debt.

Essentially, anytime you need some money rather quickly, getting a second mortgage might make a lot of sense. Talk to your mortgage broker today to see and calculate if it makes sense for what you are trying to accomplish.