Benefits of a Second Mortgage
As the name implies, 2nd Mortgage is a mortgage taken out on a property which is already mortgaged. In simple words, it’s a second mortgage on the same property. Second mortgages in Toronto are quite common these days. Homeowners take out this type of mortgage for a number of reasons, like – home improvements, debt consolidation, property investment, creating a Home Equity Line Of Credit (HELOC), and more. It is termed as “second mortgage” because of it being second in priority in the event of default by the borrower. It means that if the homeowner defaults, the first mortgage will be paid off prior to the second. Although a 2nd mortgage has its share of restrictions, the advantages it offers cannot be overlooked. Listed below are the key benefits of taking this type of mortgage on your home.
• A Quick And Simple Process
Taking a second mortgage means to borrow against something that you already own: your home’s equity. This is one of the reasons why it requires lesser documentation & paperwork in comparison to other types of mortgages. A second mortgage is therefore a wise choice when your company urgently needs bridge financing for a short time-period or when you need funds immediately because a lucrative investment opportunity is around the corner and won’t be available if you delay. In such situations, if you apply for any other type of mortgage, the slow application process can make things difficult for you. And by the time your mortgage is approved, the investment opportunity you were eying may no longer be available.
• Provides Access To A High Mortgage Amount
One of the major advantages of taking a 2nd Mortgage in Toronto is that it allows you to get a large amount of cash. As this type of mortgage is tied with the equity of your home, it provides you access to a bigger amount of money than a personal mortgage. Since the mortgage is secured by using “property” as collateral, it gives greater security to the creditor.
• Offers Competitive Interest Rates
This advantage of a second mortgage relates to the interest rates. It’s true that Second Mortgages come with interest rates higher than the initial or first mortgages. However, interest rates in the former are still lower than what is offered by various other financial products, like credit cards. So, if you are overwhelmed with your car mortgage, credit card debt, or other high-interest debts, you can consolidate all these accounts by paying off the debts with your 2nd mortgage amount. In this scenario, you will pay off your “high-interest, smaller mortgages” with your “new low-interest larger 2nd mortgage”. As a result, you will have lower monthly instalments and a lower rate of interest.
Considering the aforementioned benefits of a 2nd Mortgage in Toronto, it is definitely a viable choice for homeowners seeking to consolidate their debt, renovate their home, or create a Home Equity Line Of Credit (HELOC).