The Advantages and Disadvantages of a Second Mortgage with Mortgage Lenders in Richmond Hill

Second mortgages are loans against the equity in your home. A second mortgage is a loan taken out against the value of your property, in addition to your primary mortgage. Mortgage lenders in Richmond Hill offer clients advice for solutions on second mortgages for various purposes, as well as unexpected costs that come up from time to time.

Second Mortgages Can Be Used For:

  • Consolidating debt
  • Covering home renovation costs
  • Paying for children’s education
  • Repaying mortgage and tax arrears
  • Having disposable cash on hand
A second mortgage can offer a homeowner great benefits, but they can come attached with some large risks as well.

Advantages of a Second Mortgage

Second mortgages are based on the amount of equity built up in the home. This can allow homeowners to borrow a large amount of money with the flexibility to use it for any purpose. Credit cards and personal loans are typically smaller and more limited in scope. Many people use second mortgages to invest in other properties. Other types of loans are usually not big enough to cover these types of expenses.
There are tax benefits to using second home loans compared with other sources of money. The interest from a second mortgage is tax deductible, whereas the interest from a credit card, for example, is not tax deductible. Mortgage lenders in Richmond Hill can advise you on any applicable tax benefits.
A second mortgage can be considered safer than other types of loans, since they are secured by actual property. This means that if you default on the mortgage payments, the lenders will actually get something back. For this reason, borrowers may generally get a lower interest rate on a second mortgage versus an unsecured loan or credit cards.

Disadvantages of a Second Mortgage

Although a second mortgage can be considered safer than other types of loans, second mortgages can still be risky. If the homeowner is unable to repay the loan at some point in time, there is a risk of losing the house to foreclosure. This can ruin a credit score. The risk of foreclosure may not exist with other forms of loans. This danger should make borrowers seriously consider this type of loan.
Although second mortgage interest rates are better than credit card rates, they are still higher than first mortgage loans. The higher interest rate is charged because of the higher risk to the lender. The first mortgage takes precedence over the second mortgage in terms of repayment in the case of a defaulted loan.
If you find that a second mortgage is a good option for you, private mortgage lenders in Richmond Hill do not have the same strict criteria for second mortgages that banks do. Since second mortgages tend to be a higher risk, banks might not be so willing to give their customers one. However, with private mortgage lenders such as Canadalend, mortgages are provided by investors, so they do not have the same restrictions that many banks do. 


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