A homeowner with a property and a first mortgage can borrow additional money by taking out a second mortgage. A house may have any number of mortgages and the day and time the mortgage was registered determines its position. If a borrower fails to pay their mortgage, the mortgage lender has the right to sell the property. When a property is sold, the first mortgage must be paid first, then the second. For lenders, a second mortgage is considered riskier than a first mortgage. If there is not enough money to fully pay the second mortgage lender after the first is paid out, the second mortgage lender must take a loss. This is the reason why second mortgages in Port Hope and across Ontario are considered to be risky investments. As with most risky investments, the rates and fees associated with a second mortgage will be higher than those of first mortgages.

Second mortgage lenders in Ontario can lend up to 75% of the appraisal value for Port Hope properties. Most mortgage lenders are different in regards to approval criteria and costs. The major banks in Canada have the lowest rates and fees, but the strictest approval criteria. Private lenders are the easiest to get approved with, but they are the most expensive mortgage providers.

Why Get a Second Mortgage?

A second mortgage can be a valuable source of emergency funding. This money can be used for almost any purpose the borrower wishes. Second mortgage rates, while higher than first mortgage rates, are lower than rates charged by credit cards. For this reason, one common use of second mortgage money is to pay off credit cards and other expensive debts.

It’s possible to use a second mortgage to pay off all your credit cards and other unsecured loans to improve your credit score. The higher your credit score is, the better the interest rates will be for any loans in the future.

Alternative lenders are the main providers of second mortgages. This group of lenders includes trust companies, credit unions, and private individuals. The most important criteria these lenders look at include home equity, location, credit score, and income.

Home Equity: When it comes to real estate, equity is the difference between the value of all mortgages on a property and the appraised value of the property. All mortgages, including the proposed mortgage, must be included in the equity calculation.

Property Location: Most lenders have a preference for lending in large, well-developed cities. Smaller towns with populations less than 100,000, like Port Hope, will have tougher lending criteria and higher rates.

Credit Score: Banks, credit unions, and trust companies put a lot of focus on credit scores. If you have a bad credit score, you’ll have to go to a private lender, but you should expect higher rates and fees.

Income: Most mortgage lenders need to see that the borrower has enough income to make all of their mortgage payments. Some high-risk private lenders can still lend to individuals with no income, but they typically charge higher rates and fees.

The Various Types of Second Mortgage Lenders

The major Canadian banks provide the majority of first mortgages, but alternative lenders provide most of the second mortgages. These alternative lenders include credit unions, trust companies, and private lenders. These lenders are the next best option for people who cannot qualify at a bank. Credit unions and trust companies have requirements that are similar to a bank. They require credit scores and income but have lower requirements than banks do. These lenders charge interest rates between 4.5% and 7%. Private mortgage lenders are individuals that personally invest in properties and will generally take on the riskiest deals. Private lenders will charge interest rates between 7% and 12% and add additional lender fees.

Port Hope Mortgage Agents and Mortgage Brokers

Many second mortgage lenders for Port Hope do not advertise their services and can be difficult to find. To simplify the entire process, you can get the assistance of a mortgage broker or lender. Many second mortgage lenders deal exclusively through mortgage brokers and agents. A mortgage professional that is familiar with Port Hope can shop around with different lenders to find the best deal. They will present you with the different mortgage offers and help you to pick the offer that best suits your needs. The brokers and agents at Mortgage Broker Store have a decade of experience in providing mortgages in Port Hope. To speak with their team directly, you can call 416-499-2122 or email ron@mortgagebrokerstore.com.