Before making any decision regarding a second mortgage on your most valuable investment, be aware of the options available to you, the advantages and potential issues.
Become mortgage aware
To start at the beginning of the second mortgage cycle means knowing exactly what you are applying for and what is involved! Second mortgages in Guelph are similar to the loan that you applied for when you first purchased your home. Should you apply for a second mortgage, you are borrowing more money and using your existing home as the collateral for it.
In these days of volatile and fluctuating economic conditions, it’s understandable that situations arise that create the need for some financial relief. One way to look at this situation is that your home is one of your greatest assets, which can gain significantly in value. By taking out a second mortgage in Guelph, also known as a Home Equity Lines of Credit (HELOC) you have the means of utilizing this asset for other immediate needs and lifestyle-related goals! Finance is made available to you in the full amount, which is repayable in determined monthly payments and time period, known as amortization.
Borrower, Lender and the market
In general, the sum available to you depends on the lender and the market related value of your property. One positive financial aspect associated with a second mortgage is that second mortgages are frequently obtained at a lower rate than with other popular borrowing facilities. This is due to the lender risk being minimized by a fixed asset, your home! They are factors that contribute to the benefits that can be gained by this type of financing, usually regardless of your personal circumstances, such as being self-employed, having a poor credit record, or bankruptcy.
Associated risk factor
Another aspect related to a second mortgage is that an additional loan taken out on a home that is already subject to a mortgage could be considered by a lender to be a greater risk than the first mortgage. This is due to them being in a less influencing position regarding your property title. Should you as the homeowner default on payments and the property was repossessed, the first mortgage lender would always be the first to receive any settlement. To adjust for this additional risk, be prepared for the interest rate on your second mortgages, being higher than that of the principal mortgage.
In certain instances, you can receive a tax deduction for interest paid on second mortgages in Guelph, but there are various technicalities. Therefore, get some professional advice, before making any assumptions!