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(NC)-Think that a second mortgage means high rates and restrictive terms? Think again. Historically low rates and rising house prices have combined to make borrowing against ones home an increasingly popular financial strategy, for several reasons.
First, a second mortgage can be an excellent financial strategy for homeowners who are buying up. If these homeowners have a first mortgage at an excellent rate, changing houses could mean they'd lose that mortgage. Instead, they're opting to carry their great rate with them when they move - and "top up" their borrowing needs with one of the attractively priced second mortgages available today.
Second, a second mortgage can be a top-notch debt reduction strategy. Many Canadians carry some consumer debt, like a loan, or a credit card at a high interest rate. If the interest rates you're currently paying for your credit are higher than the rate available for a second mortgage - and you have some equity in your home - then you may want to consider a second mortgage as an option for your debt management.
And last, a second mortgage may be ideal for the first-time buyer who needs more than the 75% of the home's value available from a conventional first mortgage. Typically, this buyer would take a high ratio mortgage, in which the mortgage insurance premiums are amortized over the life of the mortgage, (even if they are able to quickly pay off the amount over 75%, or the value of their home increases over that 75% loan to value ratio). They may be better off choosing a conventional mortgage, and securing an attractive second mortgage that lets them pay off the additional funds as quickly as they like.
Second mortgages have long been a way of dealing with unexpected debt, or managing extra expenses. For example, the self-employed can accumulate tax liabilities that exceed estimates. And many parents decide to tap into their home equity to help pay for their children's education.
An independent mortgage professional, like one of the 800 plus Mortgage Intelligence consultants across the country, can help you access a broad range of lenders and find the mortgage rates and features that meet your needs.
Information provided by Mortgage Intelligence. For more information: www.mortgageintelligence.ca or 1-877-308-4892
- News Canada
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