Here are 7 tips on getting a second mortgage in Hamilton, ON. Most people don’t keep up to date on the latest developments in the mortgage market, but many significant things have been happening. In 2020, mortgage borrowing set new records. Households in Canada added more than $100 billion in mortgage debt!
There are many reasons for this. There are a lot of benefits that come with getting a second mortgage. On top of that, if you know what you are doing, you have a good chance of getting a second mortgage when you apply for one.
But what exactly are the benefits of the second mortgage? How can you be successful with your application for one?
Read on to learn all about why getting a second mortgage could be good for you and how to get one!
What Is a Second Mortgage?
A second mortgage is a loan you can use to borrow against the equity you have built up in your home. You usually use your home’s appraised value to inform how much money you can get in the loan.
In general, you will get a loan to value (85%). That means for every dollar of value that you have in your home, you can get a loan for $0.85.
Whether you are self-employed or have low income, a second mortgage is a great way to get some extra money. Most people who can’t qualify for a second mortgage can’t qualify because of bad credit or low home equity.
Advantages of Getting a Second Mortgage
Second mortgages are a great way to turn the non-liquid value you have in your home into liquid value. In many cases, you can obtain that liquid value with minimal interest rates. Second mortgages in particular have quite low interest rates compared to other kinds of debt.
The money that you pay back as interest on your second mortgage may be tax-deductible. That means that you can obtain this liquid value with minimal interest and tax cost.
The question is, how can you successfully get a second mortgage? There are a number of basic principles you can apply to improve your chances of being approved.
Keep an Eye on Your Credit Score
As in many other parts of the financial world, your credit score makes a big difference. In many cases, second mortgages are considered low risk for lenders. After all, if someone has successfully been managing a first mortgage, it stands to reason that they will do okay with a second mortgage.
On the other hand, some people are only barely managing their first mortgage. In that case, they might not be able to handle the added burden of a second mortgage.
Your credit score is one of the things that will make the biggest difference as far as whether you are approved for a second mortgage. At the very least, you should know what your credit score is. If it is low or high, that will tell you a lot about how good your chances are not being approved.
Hopefully, you have enough time to improve your credit score before needing to apply for a second mortgage. If so, you may be able to make significant gains in short order. However, this requires that you be efficient with your strategy.
If you find any old debts that are past due, pay them off. That is a fast way to bump up your credit score. On the other hand, if your credit score doesn’t have anything like that, then you will just have to continue paying back any debts that you have.
That will also build up your credit, but more slowly. In some cases, if you can pay back an entire debt, then that can increase your credit score.
Compare Different Loan Options
Make sure that you ask about the different kinds of loan options you can get from the institution offering you a second mortgage. This has two advantages.
First, it shows that you do your due diligence. This can make a good impression and show that you would responsibly manage a second mortgage.
The second thing that it does is it helps you to pick which loan option to apply for. Some may be riskier than others. If you have great credit, then you might be able to get away with applying for a riskier loan option. On the other hand, if your credit is not so good, then you might have a better chance of success if you aim for a less risky loan option.
Provide All Necessary Information
Filling out forms is never much fun. But it is important if you want to have the best chance of getting approved for a second mortgage. Make sure to provide all the information that they request.
Ask for Advice When Rejected
If your application is rejected, then that is not the end of the game. You can always apply for a loan somewhere else. However, you should make the most of this opportunity.
Make sure to ask why your application is rejected. That can help you shore up the weak points in your application and do better next time.
Enjoy All of the Benefits of Getting a Second Mortgage
We hope that you were able to take away something helpful from this brief piece on a few of the most important things to keep in mind when you are getting a second mortgage. It can provide benefits that last for many years to come. That is why it is worth taking the time and effort to give yourself the best chance of successfully getting a second mortgage.
To learn more about how to successfully get a second mortgage or for other mortgage services, feel free to reach out and get in touch with us at any time!