If you are a Toronto homeowner in dire need of money, a second mortgage can come to your aid. Such a mortgage can be taken out to pay mounting credit card debt, an outstanding car loan, or help you tide over a financial crisis. But you should have a clear idea about how this loan works before you apply for one. If you rush into a deal, you could end up risking your most valuable asset- your home. At the same time, with some smart thinking, you can use the mortgage to pay off other debt or for home improvements. You can use the equity in your home in the following scenarios.
You can take out a second mortgage to consolidate all outstanding debt. If you have acquired loans from multiple sources it becomes obligatory for you to make a monthly repayment to all those accounts. However, this repayment can get difficult when your finances hit a rough patch. A situation like this often slips out of hand and you may find yourself on the verge of bankruptcy. An additional inflow of cash can become your source of deliverance in such a situation. This mortgage can give temporary respite from this predicament and buy you some extra time to battle the odds.
Homeowners generally take out a second mortgage in Toronto to consolidate high-interest credit card debt into a low-interest debt. Your various credit card debts can be combined into a single, manageable payment. You also benefit from easy and convenient repayment. You are spared the trouble of making payments to multiple accounts. If you prefer mailing your bills, you can save on postal charges.
This mortgage is also advantageous for a homeowner since it does not require him to pay private mortgage interest or PMI which is involved with the first mortgage. Homeowners can access 85% of the home’s value and place the remaining in the second mortgage. Though the mortgage may have a slightly higher rate of interest, you can realize cost savings in the long run as your entire loan will become tax-deductible in certain cases.
Keep this in mind when you go for a second mortgage in Toronto
As with any financial product, there are risks associated with this type of mortgage. For starters, you are effectively putting your home at risk. If you fail to make your monthly payments, your home/property can go into foreclosure if you do not keep current with your obligations. In some provinces, the owner is held responsible for any deficit that may remain after the foreclosure of collateral. So, you will have to arrange for the outstanding balance that has to be paid to the lender, worsening your existing financial crisis.
A second mortgage in Toronto can work miracles for you if you know how to use it to your advantage. You can approach your current primary mortgage lender for this second mortgage in the form of a home line of credit. The lender may waive some fees, helping you save on mortgage application and processing costs and fees. Credit unions also offer flexible terms and competitive rates- so make sure you give them a try as well. If you would rather approach a new lender, make sure you compare different lenders, rates, and terms before taking the plunge.