When To Get A Second Mortgage
“Is A Second Mortgage The Right Decision?”
When home owners are faced with the need to secure additional funds, they will try to secure a second mortgage against their house.
And many times they will do so without considering whether or not a 2nd mortgage is actually the best course of action for their specific situation.
This is where the services of a mortgage broker can be truly invaluable and should be drawn upon in these types of situations.
Here are some things to consider before signing up for an additional mortgage.
First, a second mortgage can come in the form of a set amount of funds advanced for a defined purposes and paid back over a series of years (similar to a traditional mortgage) or it can come in the form of a line of credit registered in second position against your property for an approved amount and available to you as required.
If you are looking for additional funds that you expect to pay back in less than a year, then a home line of credit is likely going to be more cost effective in the long run versus a fixed term mortgage.
Second, when additional funds are being sought, the borrower should always consider the net costs of refinancing the first mortgage versus taking out an additional second mortgage. This is more about math than anything else, and if refinancing the first is going to be cheaper overall, then its something that should be seriously considered.
In cases where repayment penalties would cause refinancing the first mortgage to be impractical, then a 2nd mortgage may be the best option available.
When going through the comparative exercise between refinancing the first mortgage and adding a second mortgage remember that the ongoing costs of the 2nd mortgage can be significantly higher. So the analysis process need to consider not only the costs incurred at mortgage closing for either option, but also the go forward costs over a similar period of time to provide an accurate comparison.
This again is where a mortgage broker can provide you with a great deal of assistance first locating the programs that best suit you situation and then working through the different scenarios and comparison with you to determine your best course of action.
If you’re considering a second mortgage, I would recommend that you give me a call so that we can go through your options together and make sure you’re getting a mortgage solution that best fits your needs and situation.
About the Author Joe Walsh
I'm a Toronto Mortgage Broker that arranges mortgage solutions on residential and commercial real estate property. With over 30 years of mortgage financing experience, I'm able to quickly assess your financing requirements and provide relevant solutions for your immediate consideration. Joe Walsh Google+ YouTube Channel