Expert Mortgage Brokers | Markham Second Mortgage
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Markham Second Mortgage

Second Mortgage

A second mortgage is a kind of mortgage against a property with another mortgage in front of it. In this case, the property is provided as security for the mortgage and in the event there is a default in payment, the first mortgage will have first position ahead of a second.

A Markham Second mortgage helps finance a number of household needs. For example;

  • Home repairs
  • Education
  • Debt Consolidation
  • To pay CRA taxes or property tax arrears

Brief Analysis of First and Second Mortgages

In most cases, you will find that the interest rates on the second mortgage are typically higher than the ones in a primary mortgage. This is because in the event a borrower defaults, the primary lender will get proceeds from the foreclosure and only once they have been paid off is when the second lender will get their share.

However, second mortgages have lower origination fees than first mortgages. This makes second mortgages good for a refinancing option.

Types of Second Mortgages

A Markham Second mortgage comes in 3 types. They are; A secured Home Equity Line of Credit (HELOC), Private mortgage or Institutional second mortgage. These are discussed in more detail below.

  • Home Equity Line of Credit

This kind of mortgage is referred to as HELOC. A line of credit refers to a set limit beyond which you can’t borrow further. So when making the drawings on the account, the borrower has a fixed limit to the line of credit. This line of credit is set by the lender which in most cases is a bank or credit union. Interest rates are applied to the exact amount you borrow but not the unused portion of the line of credit. It is, however, important to note that interest rates can fluctuate. If this makes you uncomfortable then the line fo credit can be converted into a fixed rate loan (or mortgage). This particular kind of second mortgage may come in handy when you need to finance expenses over a period of time. A perfect example would be financing a home renovation project.

  • Home Equity Loan

This kind of mortgage usually is a fixed rate loan. The borrower can apply for an amount of money and then pay it back over time. This particular kind of second mortgage may come in handy when you need funds to pay things like CRA taxes or property tax bills or pay off credit card debt.

  • Collateralized Mortgage

A Collateralized Mortgage is a mortgage which can include a first mortgage, second mortgage and a line of credit. Borrowers can be given these loans in parts based on the value of their home. What this means is that borrowers would apply for a first or primary mortgage that covers a certain percent of the home’s value and also apply for a second mortgage that covers the other another percent of the home’s value. These loans and mortgages together have a collateralized amount which is then registered against the title of the property. These days, however, few, if any, lenders are willing to finance 100 percent of your home’s value.

Benefits of Markham Second Mortgage

  • Interest paid on mortgages can be tax deductible (see an investment specialist to find out how). This is helpful if you are self-employed and want to lower your taxable income.
  • The borrower can maintain access to cash for emergencies or as a back up fund.
  • It could also allow you to access equity in your home so that you can purchase a second home or use the funds for other projects.