Borrowers can qualify for a second mortgage using their home’s equity and nothing else. Traditional mortgage lenders including your bank ask you to provide income to qualify for a second mortgage. Alternative 2nd mortgage lenders are not as worried about your credit or income.
These types of loans can be based strictly on the property. Unlike trying to get a personal loan or credit card through your financial institution.
How to get a second mortgage using the equity of your home
Second mortgages can come in the form of a line of credit, mortgage, or loan. In fact, today many second mortgages are approved by lenders outside of regular banks or credit unions. These products are essentially an additional mortgage taken out against your property that already has a mortgage registered on the title. If we look at it from a pecking order that means your first mortgage has ‘first’ priority and your second mortgage comes next in line.
Variations of second mortgages out there
| Lender | Product | Term |
| Bank or Credit Union | Home equity line of credit | Open |
| ‘A’ Lender | A secured line of credit | Open |
| ‘B’ Lender | Home equity line of credit | Open |
| Private Lender | Mortgage (second position) | Open or Closed |
*Subject to lender conditions and criteria
*Borrow between 80% and 85% of your home’s value
Learn which type of the second mortgage you qualify for
You can obtain a second mortgage using just the equity in your home. The more traditional lenders rely on a borrower’s credit history and income to help determine if they will approve an application for a new mortgage. The less traditional home equity lenders believe in a common-sense approach when approving a home loan application.
The reason being is simple, everyone’s financial fingerprint is different. The makeup of your household income can be complex and we as professionals get that. To sum it up don’t panic where income is concerned and don’t feel like you need to be making endless amounts of money to get approved.
Here is a helpful tool to understand lender credit score requirements:
| Lender | Credit Score |
| Bank or Credit Union | 650 & Up |
| ‘A’ Lender | 650 & Up |
| ‘B’ Lender | 540 & Up |
| Private Lender | NO SCORE MINIMUMS |
*Subject to lender conditions and criteria
Refinancing your home for some additional funds
Banks and credit unions can accommodate a mortgage refinance without compromising your existing mortgage. Adding a new mortgage at a brand new interest rate to avoid any penalties you would pay on your current mortgage. Simply put the new mortgage is added to the title without impacting the mortgage already on the title.
The application process is similar to when you obtained your existing mortgage and means that you will need to provide income to get approved. Once your application is approved an appraisal is done on your home. If some time has passed since you purchased the property it may have gone up in value. The appraisal benefits you and the lender by providing a sense of security based on today’s market.
Interest rates for the new mortgage will be based on today’s market rates. Your existing mortgage rate will remain the same, you could stand to benefit from lower interest rates and lower monthly payments as well.
Second mortgages using my home’s equity
Secondary financing can be of great use whether you require money in the near future or needed the money yesterday. At some point in life, we often come to a point where we could have used today’s money yesterday. A second mortgage or loan against your home can be used for almost anything.
- Consolidate debts
- Household cash flow
- Payoff income tax arrears
- Business capital
- Property tax arrears
- Mortgage payment arrears
- Stop home foreclosure
- & much more
Advantages of getting a second mortgage
Borrow as much as you need
When you use your home’s equity as collateral you can borrow as little or as much as you need to. There are no qualification guidelines that you need to fit into. You simply are getting approved based on the property you own. The amount of money you receive comes in the form of one lump sum and not in stages or monthly draws.
Income tax benefits
Depending on the property you may be able to benefit from a mortgage interest deduction for the interest paid. If the property is a rental or investment property you could save yourself quite a bit during tax season. It would benefit you to speak with your accountant or tax lawyer to ensure you are eligible and what technicalities there are.
Interest rates
Rates on a second mortgage often have much lower rates than other types of credit. An unsecured loan or line of credit normally has high interest due to more risk. With higher interest rates come larger payments and a longer period to pay off what you owe.
Again, using home equity for a loan reduces the amount of risk for the lender. Less risk means your chances of obtaining a competitive interest rate are higher.
There are several reasons you may be considering a second mortgage and not just one. At Lendtoday.ca our team of mortgage agents and underwriters work to find the right financing for you. Experience dealing with high-risk borrowers suffering from bruised credit, low income, and simply can’t get approved.
Have questions about second mortgages? Give us a call today to learn how much you can qualify for 1-855-242-7732 or apply online now.
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