When Should You Refinance A Second Mortgage?
A second mortgage allowed you to get the house that you wanted or to have extra cash for some project – but that was a few years ago. You have built up some equity in the house and are now wondering if it would be a good time to refinance your second mortgage. Here are some things you need to know in order to help you make that decision intelligently.
Refinancing your second mortgage can be a good deal if the interest rates are better than what you already have. Otherwise, not only would you be increasing your payments, but you would also be adding the cost of refinancing to it, too.
If the current interest rates are lower than what you are paying now, by at least a full percent, then it could be a good move to refinance. Or, if you have built up a sizable equity since you took out a second mortgage, then now could be a good time.
Refinancing a second mortgage means that there are two ways for you to go. One way is to get a second mortgage for all of the equity built up in your house – a home equity loan. A second way, which could be less costly, is a home equity line of credit (HELOC).
A third option may also be available – refinance everything. This would be especially appealing if you have an adjustable rate mortgage for your first mortgage. Interest rates are not exactly promising at the moment and you may want to look for something that is predictable for many years to come. Of course, you would only want to consider this option if you are planning on living in your present home for a few more years to come. The cost of refinancing everything would involve taking a few years to recoup the costs of doing just that.
If you choose to get a HELOC arrangement for a new second mortgage, then you have the option of having cash available – but it is also cash that you do not have to pay interest on until you use it. There is an assigned period of time that you have to use the designated amount (the equity you have) – usually this is about eight to ten years – depending on the time frame of the second mortgage. The last roughly two-thirds of the mortgage is the time that you repay the amount you used. All interest is only based on the amount that you use.
In order to save even more money when you get a new second mortgage, be sure to keep it reasonably short. Remember that the longer time frame you have on a mortgage, the more you are paying in interest. Talk to the lender to see what your options are for the amount of money you want.
As with any mortgage, be sure to learn all of the details involved. This includes understanding what other companies may offer if you were to deal with them. Money can be saved by comparing and also by negotiating for a better deal. They will usually work with people who want to negotiate, and they do expect it.
By: Joseph Kenny
More Canadians Purchasing Second Homes
More Canadians than ever are purchasing second homes. No longer the purview of the wealthy, second home ownership has gone mainstream. For many Canadians, it’s the dream of a summer cottage, golf retreat or a winter chalet.
For others, career or family demands fuel the desire for a second home: for business stays, or to shelter the university student studying in a distant community.
Now that the Canada Mortgage and Housing Corporation(CMHC) has introduced a Second Home program – helping Canadians borrow up to 95% of the home’s value – the purchase of a second home is easier than ever. And the attraction of the real estate investment is just as compelling with your second home as it is with your first. Not only can it be a good financial investment, but it’s an important
emotional investment too. Here are some things to keep in mind when you finance a second home:
Can You Afford It?
This is the most important question you have to ask yourself. If you are planning to purchase a second home, you’ll want the best possible financing for your new real estate investment. There’s no question that financing is easier than ever. But a mortgage broker can help you figure out exactly how much second home you can
comfortably afford. It’s a great time to begin that conversation;
market conditions are in your favour, and mortgage interest rates are still at a near all time historical low.
What Are Your Financing Options?
The CMHC Second Home program has been the big breakthrough for Canadian second-home buyers CMHC will insure a property purchased
for a family member attending college or university away from home. And the program is very popular as a means of purchasing a vacation property. There are a few provisos here: either the borrower must occupy the property for at least some part of the year, or a family member must occupy the property on a rent-free basis. The property must be winterized, and be accessible for year-round occupancy.
And it must be located in Canada. Be careful with island properties; they should have year-round bridge or ferry access. Note, too, that program can’t be used to purchase time-shares or similar rental pools.
What Do The Mortgages Look Like?
By far your best bet here is to talk to an independent Ontario mortgage broker with access to a wide range of lenders. The mortgages for second homes can vary widely in the rates and requirements.
Can I Leverage My Existing Equity In My Primary Home?
This is an option that your mortgage broker can help you look at. This involves a cash-out refinancing of your existing primary home mortgage with a higher borrowed amount. Instead of waiting and saving years for a second home, you can access money based on the value of your primary residence and your present financial profile to help you finance a second property.
A Second Mortgage For A Second Home?
Is this the right option for you? A second mortgage is the most common way to use your home equity. No need to wait until you’ve saved a down payment for a second home investment, but you must
have the funds and cash flow to comfortably make both mortgage payments. Your broker will work out the best terms for you.
It’s your second home. That means that it’s primarily for your own or your family’s use (although you may rent it out casually and temporarily). If you’re looking to purchase an investment property, your mortgage broker can help with that too… but it’s not the same as purchasing a second home.
If there’s a family cottage in your dreams or a student condo in your plans, this is the time to get serious about a mortgage plan to make it happen.
Check out your options.
By: The House Team Of Mortgage Intelligence
Bad Credit Second Mortgage Lenders Take A Risk On People With Lower Scores
If you need a bad credit second mortgage, you should know that they exist, though you might need to work a little harder to find them. Lenders who specialize in the bad credit second mortgage market tailor their portfolios so that they can assume the extra risk these loans entail. As a result, you will pay higher interest and fees.
Second mortgages are secured loans that do not have first claim to the house. If you go into foreclosure, the primary mortgage will be paid off from the proceeds of the sale before the second mortgage is. That is why second mortgage interest rates are higher because there is more risk involved.
Because people with bad credit are at higher risk of defaulting on their home payments and going into foreclosure, bad credit second mortgage solutions are harder to find. Here are some of the things banks look for.
First, is there any equity in the home? A bad credit second mortgage ca often be secured when the homeowner owes 80 percent or less than the house is currently valued at.
Second, is there a low debt to income ratio? The more debt you have, the less chance you have of securing a bad credit second mortgage.
Third, do you have a solid employment history? If you do, you are more likely to secure a bad credit second mortgage.
Second mortgages can be used for a number of things. If you do not have the traditional 20 percent down payment, the second can secure the difference. Seconds are also used as home equity lines of credit to allow the homeowner to renovate the home or just spend the money.
It is also possible to secure a second mortgage above and beyond the value of the home. Though this was more common when the credit markets were flush, sometimes you can get loans totaling 125 percent of the value of the property. Lenders usually allow these loans when they perceive that the value of the property will rise in coming years. This could be because the real estate market is on the upswing or it could be because the new owner is investing in improvements.
You should also know that it is possible to take out third and even fourth mortgages on your home, though these are rare. The interest rate on each successive loan becomes steeper as the order of payment in case of a foreclosure is reversed.
Prior to its going belly up, Countrywide was the largest source of bad credit second mortgages. Now that they are no longer in business, it is more difficult to find these loans. If you need a bad credit second mortgage, you may want to simplify the search by turning to online providers. In this way you can fill out one form and have several lenders make offers for your loan. You can compare rates in one easy step.
By: Marcilio David