CONSOLIDATE DEBT NOW BLOG

Posts Tagged ‘debt consolidation’

TAKING OUT A SECOND MORTGAGE

A second mortgage is one of the most useful mortgage instruments available to consumers.  A second mortgage is a cheap effective way to consolidate debt, free up extra cash flow and avoid paying big penalties on your mortgage.  Imagine this scenario: You are 2 years into a 5 year term on your mortgage and you lose your job causing you to accumulate a large debt load with a high interest rate.  You go to your bank but they advise you that the penalty to break your mortgage to refinance is going to be $15,000.00.  You could pay the penalty to refinance but if you elected to take out a second mortgage you would not be obligated to pay this penalty.  You would still get a competitive rate that would work out to be significantly less than if you factored in the penalty you would pay to break your mortgage.

Another distinct advantage is that you would not be obligated to meet the insurer’s (such as CMHC/Genworth’s) lending criteria.  I see a lot of clients being turned down for refinancing because a lot of banks mandate their clients meet their insurer’s standards that they would not have to otherwise meet when applying for a second mortgage.  Most lenders giving out second mortgages are looking more at your equity position than your credit and employment scenarios.

A second mortgage can be arranged in a variety of ways.  A secured line of credit ban be a form of a second mortgage.  This gives the borrower the freedom to use it like a credit card, paying only on the balance that is owed, using whatever balance is available all at a very low interest rate.  Secured lines of credit are fully open and can be paid off at anytime without penalty.  This means that when your first mortgage comes up for renewal you can arrange to have your line of credit paid off and it won’t cost you anything extra.  Borrower’s can also elect to get a fixed rate & term second mortgage.  This type of second mortgage is just like a typical first mortgage which is set out to be repaid over a pre-determined set of time with a fixed interest rate. 

Most people elect to take out second mortgages to avoid paying large penalties on their mortgage or to avoid having to meet strict lending criteria. Either way they can be a very useful tool and can help you accomplish your end goal without all the added cost or headaches.  If you are interested in finding out more about how a second mortgage can benefit you call us today!  Toll-free 1-866-668-6570.