Most Common Questions Regarding  Second Mortgages in Canada

second-mortgages in-Canada

 

Most homeowners in Canada likely have come across a second mortgage while pursuing their options when looking for a loan and such. You might even be wondering how this type of mortgage is going to help you out.  You likely will have a ton of questions regarding second mortgages, which is why we have rounded up some of the most common FAQs to help you out.

  • What are the different types of second mortgages? There are actually different kinds of second mortgages Canada available.  A home equity loan and Home Equity Line of Credit (HELOCs) are the most commonly used. HELOC is where you will be given a revolving line of credit, while the home equity loan is where you get a lump sum of your loan.
  • Can you pay for interest-only? It is possible for you to pay the interest only in certain types of second mortgages. This is one feature that you should consider if you are planning on paying the entire loan once you have the money you’re waiting for.
  • What is the limit that can be loaned? For those who are considering applying for a second mortgage loan, you’re most likely wondering how much you can loan. Normally, you can borrow up to 80% of the total value of your home equity. Simply put, if your current home equity is at $100,000, you can borrow up to 80,000 when you apply for the second mortgage.
  • What about collateral? Since you will be applying for a second mortgage, you might be wondering what the collateral will be. When it comes to collateral, it will be the home equity that you have built up on your property. What this means is that, when you fail to pay your dues, it can result in the foreclosure of your property. This is why you need to read the fine print before signing any documents for your second mortgage Canada application and understand the entire process and terms.
  • Are there any fees? Aside from the interest, there are certain fees that can be added to the overall cost based on the type of the second mortgage that you applied for. One way to know how much you’ll need to dole out is to talk to a mortgage lender so that you will be able to discuss all pertinent information such as fees etc..
  • Do interest rates vary? Since there are different types of second mortgages in Canada, you should expect that interests will vary too. The biggest factor that will affect the interest rate is how high the risk that the lender is facing when they lend money to you.

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