Are you a homeowner in need of extra funds? You’re actually sitting on it – your house. Your house is a source of extra money through second mortgage.
There are two types of second mortgages – home equity loan and home equity line of credit. You use your house in order to obtain a specific amount of money. With home equity loan, you are given a lump sum in one go, payable through monthly amortization and can be used with flexibility. Home equity line of credit acts like a credit card. You use this source of money to pay for purchases just like how you would use a credit card. You can use your home’s equity any time you need it.
Home Equity Loan versus Home Equity Line of Credit – Which One is Better?
It really depends on what you need the money for. If you need a big amount of money to invest on, say, a new business, home equity loan is the best way to go. Additionally, the interest rate for this loan is fixed so you can repay the loan over a period of time.
Home equity line of credit is great if you only need an extra source of money – an emergency fund you can use to supplement your current income. When you need the money, you can tap into this line of credit. The amount of money you are going to pay is less burdensome than the home equity loan. However, the interest rate for home equity line of credit varies depending on the financial index.
How You Can Benefit from a Second Mortgage
Whether you are thinking of getting a home equity loan or a home equity line of credit, there are a myriad of things you can get from second mortgage:
1. It offers an easier way of acquiring extra funds.
The process of getting a second mortgage is typically easier than acquiring other types of loans. That is because banks tend to be more lenient with the qualifications since you are using your home as collateral. In case you can’t pay for the loan, the bank can use the collateral as a payment.
2. You can get as much as 85% of your home’s loan-to-value ratio.
Combining your first and second mortgages, you can get as much as 85% off of your home’s loan-to-value ratio. That’s a significant amount of money, especially if you are using home equity loan. You can use that fund to invest on a new business or use that to improve your home’s current value.
3. The interest rates are good.
If you have a good credit score, lenders can offer the best interest rates.
How to Get Second Mortgages in Calgary
Once you a ready to commit to a second mortgage, you might want to get the best deals. While it is easy to approach any lender, it is important to look around for the best ones so you won’t be cheated out of your home’s real value.
If you already have an existing bank, you can ask their terms for a second mortgage. Compare that with other banks in Calgary and determine which one can offer you the best interest rates. You can also use the lender for your primary mortgage to consolidate payments. This might also allow you to save more money on fees.
Using the services of a mortgage broker is also a good step. Chances are, you’ll have a hard time looking around for the best lenders, especially if you have a bad credit score. The mortgage broker can show you which lenders are the most reliable and which ones you should avoid. Since the mortgage broker is affiliated with different lenders, it’s also easier for you to do a comparison on the different interest rates for the loan.
Find an experienced mortgage broker who has been in this industry for many years. Make sure you do a thorough search about their background to learn more about their expertise and reliability. Choose a mortgage broker who understands what you need and what you are looking for in a mortgage broker.
It’s also advantageous for people with a bad credit score to hire a mortgage broker. The broker can help you find lenders willing to offer the best rates even with your current credit standing.
When used correctly, second mortgages are really helpful. But before you get this loan, make sure you have already planned where to use the money and if you can shoulder the additional expenses, especially if you still have your primary mortgage and other loans to take care of.