Those in Toronto or the Greater Toronto Area (GTA), who have bought a home and secured a home loan are able to take out a second mortgage for a number of reasons through private lenders. Lenders will expect monthly payments with interest. The average interest rates on a second mortgage in Toronto and the GTA can expect to pay are 10%-18%. Lenders may provide a full value loan, however most loans are frequently 80%-85%. There are a number of reasons Toronto residents may be wish to secure a second mortgage.
Some reasons you might benefit from a second mortgage
- To acquire funds to renovate or remodel your home.
- To attend to more urgent debts, such as auto loans or credit lines with high interest rates.
- To pay for your child’s educational expenses.
- To invest in stocks or another investment.
Second mortgages in Toronto should be handled with care, but if you have determined that a second mortgage is a solution you wish to pursue, you will need to be savvy about your approach and do a lot of research to avoid exploitation and get the most out of their second mortgage.
There are some important points and tips you should take into consideration.
- Second mortgages are considered a high risk loan, which means slightly higher interest rates.
- You should have a good credit score to ensure paying the lowest interest rates.
- Second mortgages are usually provided by private lenders and small financial institutions.
- Second mortgages tend to be interest only.
- One year terms are typical for private lenders in Toronto, but at the end of the year you may be able to renew the loan.
It is highly recommended to have a lawyer to help you negotiate your second mortgage. This could cost up to $2000 in legal fees. However, this representation is imperative and any trustworthy institutions will require it.
In an application for your second mortgage, lenders are looking for a few things in candidates for a loan.
- Equity, or the money you have readily available in savings, investments or otherwise reserved.
- The information provided by your credit history and your current credit score.
- Debt and how your debt compares to your monthly income.
- What your income is currently, and whether large gaps in employment are frequent over the course of your employment history.
Essentially, reliable borrower history as well as an unquestionable ability to pay off the loans are the primary factors to be considered when you’re asking yourself if a second mortgage is for you. Once you have taken all of this information into consideration, you should be ready to proceed in seeking a second mortgage.