Wondering ‘what is a second mortgage?’ It is a second loan that is taken out on your property. It is possible to borrow up to 80% of the value of your home, apart from the remaining balance of your initial mortgage. A second mortgage is a secured loan, taken against your home equity. It is important to note that if you take out a second mortgage, you will need to repay both your new mortgage in addition to your first mortgage.
What are the risks of a second mortgage?
A second mortgage can be a risky way to repay your credit card debt and can sometimes lead to a larger total debt load as a result of the increased monthly payments. If you can’t make your payments and your second mortgage loan goes into default, you may lose your home. It is, therefore, something that should be considered seriously. If your second mortgage loan goes into default, your home will be sold to pay off both of your mortgages. Your first mortgage lender would be paid off first. It can also be difficult to have a second mortgage approved by the lender – especially if you already have a poor credit report.
How much does a second mortgage cost?
Interest rates on second mortgages are typically higher than those on first mortgages. This is because they are usually riskier for mortgage lenders. In addition to expensive interest rates, there are often a number of fees. These administrative fees usually include appraisal fees, title searches, title insurance, and legal fees. It is also important to note that consolidating your debt through a second mortgage to borrow for debt repayment, or to buy new assets does not increase the value of your property.
What are the alternatives to a second mortgage?
There are plenty of alternatives to second mortgages, and most often they involve much less risk. Alternative debt relief options such as filing a consumer proposal can help to significantly reduce the debt that you repay. A consumer proposal will also provide you with a reasonable monthly payment, and preserve the remaining equity in your home. Find out more about your assets and a consumer proposal. Equally, a consumer proposal will immediately stop interest, reduce your total debt, and allow customized payments over your proposal term. It can give you a fresh start on your finances and allow you to start saving for the future. Other options like filing bankruptcy may be more appropriate, which is why talking to an experienced Licensed Insolvency Trustee should be your first step in gaining debt relief.
To review options that may help you reduce your debt without adding to it, please contact us at 310-4321, email us, or visit our nearest location for a free consultation. You can also fill out our free assessment form online and one of our representatives will contact you directly. Let us help you live for your future today!