The Canadian Second Mortgage Explained
Taking out a first mortgage is a huge financial decision and electing to get a second mortgage is just as large. These mortgages use the home’s equity to fund education and vacations. This mortgage is basically a second lien on the home. Due to the added risk, the second loan carries a higher interest rate than the first.
Though there are various types of mortgages, it is advised that a homeowner find one that is insured by the Canadian Mortgage and Housing Corporation because it will include mortgage loan insurance. The CMHC will provide a mortgage in amounts up to 90 percent of the home’s value. CMHC provides a wealth of information regarding the entire home buying process.
Canadian banks and mortgage companies provide basic information and rates on their Web sites. An alternative is to use a mortgage brokerage firm because these companies will do the comparison-shopping and return a list of results. Homeowners can select the best loan on the list and fill out an online or paper application to determine if they qualify.
Second loans may be used to pay off debt, make improvements to the home, or pay for schooling. They may also be used for investing purposes or to fund that dream trip. Non-permitted use includes past-due taxes or loan, credit card, or mortgage payments.
The various forms of documentation required during the application process include stable employment history, employment verification, recent pay stubs, and in addition, the first mortgage must be at least one year old. Once the mortgage is approved, it will take a few weeks to fund. When the term of the first mortgage expires, the second mortgage may usually be combined with it, yielding only one mortgage and one payment with a lower interest rate.
A second mortgage provides money for travel, education, and bill pay off. It may also be used for home improvement or large-scale repair projects. It does not require much time or paperwork to apply for this second loan and the money will be available quickly. Upon expiration of the first mortgage, the second loan may be combined with it, resulting in one mortgage payment carrying a lower interest rate.
Do you live in Canada and are looking for a second mortgage? When it comes time to consider home mortgage refinance, check out Canada-Smart-Mortgage.com for more information.