Second Mortgages in Etobicoke
Access equity without breaking your first mortgage, with a clear plan for paying it off.
What is a second mortgage?
A second mortgage is a loan secured against your home that sits behind your existing first mortgage. Your first mortgage stays in place, with its current rate and terms, and the second mortgage is registered in second position on title.
Second mortgages are often used when breaking the first mortgage would trigger a large penalty, or when a bank will not refinance. They are commonly arranged through private lenders and are usually short term.
Who typically uses a second mortgage in Etobicoke?
Etobicoke homeowners use second mortgages to consolidate high-interest debt, to cover a short-term bridge such as a renovation or a gap between closings, or when self-employed income or bruised credit makes a traditional refinance difficult.
The common thread is home equity. A second mortgage lets you use some of the equity you have built while keeping your first mortgage untouched.
How costs differ from a bank mortgage
A second mortgage carries more risk for the lender, because it is repaid after the first mortgage if a property is sold. As a result, rates are higher than a bank first mortgage, and there are usually lender and broker fees, along with appraisal and legal costs.
All rates, fees and costs are disclosed to you in writing before you sign. Comparing the total cost of a second mortgage against the penalty and cost of refinancing your first mortgage is an important part of the decision.
Risks and your exit plan
A second mortgage adds another payment and another lender with a claim on your home. If you can't keep up with both payments, or can't renew or pay it off at the end of the term, the consequences can be serious.
Before you proceed, you should know how the second mortgage will be repaid. Common exit plans include combining both mortgages into one with an A lender at your first mortgage's renewal, paying it down from a sale, or paying it off once improved credit or income allows a traditional refinance.
What Swapnil needs from you
- Government-issued photo ID
- Your most recent mortgage statement and property tax bill
- Proof of income: pay stubs, a letter of employment, or for self-employed clients, recent Notices of Assessment and business financials
- Home insurance details for the property
- A list of debts you want to address, with recent statements
- Your plan and timeline for moving back to a traditional lender
Frequently asked questions
Do I need to break my first mortgage?
No. Your first mortgage stays in place with its existing rate and terms. The second mortgage is a separate loan registered behind it.
How much equity do I need?
It depends on the lender and the property. Lenders look at your combined mortgage balances compared with the home's appraised value. Swapnil can review your numbers before you apply.
Will I know all the fees before I sign?
Yes. All rates, lender fees, broker fees and other costs are disclosed to you in writing before you sign anything.
Is a second mortgage better than a HELOC?
A HELOC from a bank is usually less expensive if you qualify. A second mortgage is often considered when a HELOC or refinance is not available, so it is worth checking those options first.
When is the best time to pay it off?
Often at your first mortgage's renewal, when both balances can sometimes be combined into a single mortgage with a traditional lender, if you qualify at that point.
Swapnil Patel is a licensed Mortgage Agent Level 2 working with Affinity Mortgage Solutions, part of the Dominion Lending Centres network. Each Office Independently Owned & Operated.
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