The second mortgage also comes under home equity loans, therefore, there can be a lot of similarities between the two. On the other hand, there are also some differences between the two. So if you are worried about the one to choose, go through the article and decide which one suits you best.
Both of these are borrowing methods that people use to get a huge sum of money at once. This helps them to cope with the challenges and do the urgent things they want to. Afterward, they can return the whole amount in monthly installments.
For example, if you have your marriage ceremony in a few months but you do not have enough money to make preparations. Asking the banks for a loan is somewhat a challenging thing to do. Furthermore, they have a lot of conditions. So you are only left with pledging your home and taking out the amount you need.
Getting a loan through mortgages is not at all difficult. For example, if you are living in Toronto and need to get a loan, you can go to Homebase Mortgages. They provide loans to people who have a share in a home property or own their house. So whether you want a home equity loan or a second mortgage, you can go to them. There, you will see a form of application. You need to provide your name, contact information, the purpose of the loan and the value of your property. In addition to this, you also need to tell them the mortgage balance and the requested loan.
And if you want to say something else, there is also a message box. You can write your request there. Afterward, press Apply Now and your request will be approved in a maximum of 24 hours. So be ready to hear from them within a day.
Things you need to know about a Home equity loan
A home equity loan allows you to borrow an amount by pledging your home. The lender will analyze the value of your home and will lend the amount accordingly. Furthermore, if you have a share in any home, you will need to have at least 20 percent share. If your share is less than 20 percent, you won’t qualify for the loan.
So, if the value of your home is 250,000 dollars and you have an equity share of 20 percent. This means that the lender could get $50,000 if you do not pay your debt.
Furthermore, you do not have to return the whole amount at once. You can make installments for a period of 5 to 30 years. Thus, you will have a fixed amount to pay every month. This will allow you to manage your budget accordingly.
The amount you can get and the returning period depends on the lender. Therefore, there are no fixed rules to follow or any certain criteria. If the lender is a good person, he might listen to you and make monthly installments according to your requirements. Otherwise, he will make the plan for you and tell you that you have to pay this amount on monthly basis.
What will you get?
You might also want to know how much money you will get as a loan. The lender will determine this amount according to the loan to value ratio. If you want to calculate the borrowing amount, follow this formula.
Add the amount that you want to borrow to the amount that you already owe on that house. Now divide this amount by your home’s market value. The resulting amount will be the LTV ratio.
In addition to this, if you have already paid a large sum of the amount from the previous loan, you can still ask for a sizeable loan. This shows that you are capable of returning the lender’s amount.
Things you must know about the Second mortgage
So what is a second mortgage then? A lot of people regard a home equity loan as a second mortgage too. Although the main phenomenon is the same but there are certain different things too. For example, you get a loan on your home which is already in debt.
To put it simply, you got a loan by pledging your home. After some time you need another sum of huge money. However, you do not have any other source to ask for. So you go to the lender and ask if you can borrow more amount from that house.
Now the situation depends on the lender. If he wants to lend you more amount, he can. If not, then you cannot force him. Now you will have the only option to go to another lender. If the conditions suit him, he can ask you for details. He will analyze the situation and will see whether the conditions suit him or not.
Furthermore, you should also know that there will be a higher interest rate on the second mortgage. In addition to this, the conditions will be different from the first one. So, you will have to keep these things in your mind.
Another important thing is that if you fail to pay off your debt, your property will be sold. Afterward, the payment will first go to the first lender. And after that, there will be the turn of the second lender.
Therefore, if the second lender is asking for a higher interest rate, you won’t be able to negotiate with him. The only way for you to talk about these things is to show him proof that you are serious about returning the amount.
If your payments are regular and you are sincerely paying off the first debt, you might get some leniency. Moreover, in such a case, there is a high chance that your first lender lends you another loan.