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Second Mortgage in Canada: Turn your Home Equity Into Cash

Whether you need $10,000 or $500,000 – Alpine Credits is the best option for second mortgage in Canada

After owning your house for some time, you build equity, which can act as a financial tool. The equity value of your home can be accessed as a second mortgage. Getting a second mortgage in Canada offers more opportunities than most Canadian homeowners realize.

Turn your home equity into cash now and use it to achieve your financial goals.

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What you’ll learn from this content:

  • Second mortgages and home equity loans are nearly interchangeable terms; you can find these loans at Alpine Credits.
  • Homeowners who have some equity can access a second mortgage to consolidate outstanding balances, invest in business ventures, or renovate.
  • Compared to getting second mortgages at a major financial institution, Alpine Credits only requires you to have enough equity.
  • Home equity loans are the most versatile kind of second mortgage, home equity loans being one of them.

What is a second mortgage?  

A second mortgage is a separate, additional loan agreement to your existing mortgage while you still pay for your house. The loan is secured against your property and can be used for any purpose. Since your property is collateral, its value determines the maximum amount you can borrow.

You can find second mortgage opportunities at a bank, an alternative, or a private lender. Traditional lenders’ criteria can make qualifying for one challenging. Your primary residence will act as collateral, and having the right credit score and income are requirements for getting a second mortgage.

On the other hand, alternative lenders will determine your eligibility based on how much equity you have. If you own at least 25% of your property’s value, you’ll likely be eligible for a home equity loan.

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How does a second mortgage work? 

real estate agent giving keys to client

As mentioned previously, second mortgages use the equity in your home to determine the value of the loan you’ll receive. You can calculate your equity by subtracting your outstanding mortgage from the appraised value of your home. If you have a house worth $1,000,000 and your outstanding mortgage is $600,000, your equity is worth $400,000.

Second mortgage lenders will allow you to borrow up to a certain amount of your property’s value, usually between 70% and 80%. If your lender allows 75%, you could be eligible for a loan of $150,000. The loan is enough to cover significant purchases, including renovation or a down payment on another house.

Benefits of a home equity loan

  • Fixed interest rate—your payments will be predictable, which allows you to budget and make financial plans. They also provide peace of mind when the market conditions change.
  • High loan amount—the more equity you have, the bigger your loan will also be. As a result, borrowers have flexibility on how they’ll use it. Even though a personal loan may offer the same flexibility, they are limited to a value of $50,000.
  • Comparatively lower interest rate—with interest rates lower than credit cards, a second mortgage makes a viable option for more significant expenses. Not only that, but your payments will go towards the principal instead of just towards the interest.

Signs you need a second mortgage  

Second mortgage loans can be helpful in a handful of different situations. The following are some of the main reasons.

  • You need to consolidate—a second mortgage can have high value, so it can satisfy several outstanding balances, allowing you to focus on repaying one loan instead. They usually have lower interest rates than combined credit cards and other loans.
  • You need home improvement—money from a second mortgage can provide enough funding to cover hiring a general contractor or paying for materials. With home equity loans, you may achieve more extensive renovations.
  • You need business funding—if you own a business or want to start one, you can find financial support from a second mortgage. Getting your funding from alternative sources will mean you don’t have to provide a business plan or your company’s credit history.

Requirements for a second mortgage 

As an alternative lender, Alpine Credits does not need to see your credit score to determine your eligibility. You can be approved for a loan if your house has significant equity.

  • Sufficient equity—if you have at least 25% home equity, you are eligible for a home equity loan. The more you have, the higher the value of the potential loan you may be able to obtain. You can provide appraisal documents to show that you have some equity.
  • Valid identification—all borrowers must be Canadian and over 18 years old.
  • Proof of ownership—mortgage balance statements and proof of home insurance are documents you can submit that demonstrate that you are the house owner.

Traditional financial institutions determine applicants’ ability to borrow money based on their financial background, which can be challenging for people with low credit scores. However, Alpine Credits’ goal is to remove barriers that keep homeowners from borrowing by offering a simple application process.

How to get a second mortgage at Alpine Credits  

Alpine Credits offers specifically home equity loans, a type of second mortgage. The application process with Alpine Credits is simple. You can complete it within a few minutes and hear back within a few days to a week.

  1. Apply online—you can go straight to applying online. The application takes only a few minutes.
  2. Receive application results—you have near-instant approval as long as you have sufficient equity in your house.
  3. Use your home equity loan—within a few days to a week of receiving your approval, you’ll see the money deposited into your bank account.

If you regularly keep up with your mortgage payments, you’ll naturally build equity as you continue to live in the house.

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Ways to access a second mortgage

While second-position mortgages refer to an additional loan on top of your first mortgage, homeowners can access them differently. Some of the types include home equity loans and home equity lines of credit (HELOCs).

  • Home equity loans—this kind of second mortgage allows homeowners to access the value of their equity as a lump sum amount.
  • Home Equity Line of Credit (HELOC)—a revolving loan that allows you to continuously spend and repay with a credit limit dictating the maximum amount you can spend.

First mortgage vs second mortgage

One of the most asked questions is the difference between second and first mortgages. They have some unique attributes, and understanding the different characteristics can help homeowners in their financial journey.

First mortgages Second mortgages
·       Used for buying a house

·       Mortgage rates depend on market conditions

·       Flexibility of purpose

·       Interest rates may be higher than the first mortgage

·       Take repayment priority

·       Profit after the sale goes to the homeowner

·       Secured by your home equity

·       Profit after the sale goes towards the first mortgage

Both loans require some deliberation before moving forward with an application, but they also provide new financial opportunities to borrowers.

Learn more about 1st and 2nd mortgages. https://alpinecredits.ca/alpine-blog/first-mortgage-vs-second-mortgage/

Second-position mortgages vs mortgage refinancing

Another common financing option in Canada is mortgage refinancing. It allows you to access your home equity, but it is not the same as second-position mortgages. Because mortgages are contracts with a set term, refinancing is what homeowners do near the end of their mortgage loan term.

Homeowners use it to negotiate a new mortgage term to get lower interest rates, access home equity as cash, or consolidate financial obligations. Refinancing also lets homeowners switch lenders. There are two types of mortgage refinancing: rate-and-term refinancing and cash-out refinancing.

Some of the differences between these second mortgages and refinancing include:

Second-position mortgages Mortgage refinancing
·       Doesn’t replace first mortgage

·       Fewer closing costs

·       Negotiate loan terms and interest rate

·       More flexibility

·       Change or keep primary mortgage lender

·       Like first mortgage application

Second mortgages vs home equity loans

A home equity loan is classified as a second mortgage, but not all of them are home equity loans. They are similar concepts to the point that they are almost interchangeable terms, but they still have a few distinctions.

Second mortgages Home equity loans
·       Include other options like home equity lines of credit (HELOCs), reverse mortgages, mortgage refinancing

·       Various types of repayment terms

·       Can be obtained at alternative lenders like Alpine Credits

·       Fixed or variable interest rates

·       Fixed interest rates only

·       It’s one of the types of second mortgage

 

Just like regular personal loans, borrowers must repay the second mortgage over a set amount of time. They usually have lower fixed interest rates than credit cards or unsecured loans.

Conclusion: Choose Alpine Credits as your second mortgage lender

If you’re a homeowner who has paid their primary mortgage, you could be eligible for a second mortgage. Consider applying for a home equity loan from one of the different types of second mortgages. The lump sum can help you cover the cost of consolidation, renovation expenses, and business investments.

Contact a Financial Solutions Specialist at Alpine Credits, and they can answer your questions about home equity loans. Each team member is an expert on home equity financing and is determined to help you find a solution to your financial needs. If you own your home, you can be approved for a loan.

Apply now

Frequently asked questions

A second mortgage is a good idea if you must finance major expenses like home renovations or business investments. They are attainable options for those who want to accomplish major financial goals despite having bad credit or inconsistent income.

Alternative lenders can approve you for a second mortgage despite a low credit score. Homeowners with some equity can contact Alpine Credits to be approved for a home equity loan.

You can borrow up to 75% of your home’s value. The amount that can be borrowed will change between homeowners because of the house’s appraisal value and the outstanding mortgage balance.

The interest rate depends on both market conditions and the lender. Depending on the type of second mortgage, they can have variable or fixed rates, but lenders may change the interest depending on various factors, such as the prime rate in Canada. Regardless, the interest rate will be less than credit card rates.

Second mortgage borrowers should remember that the loan requires some financial discipline. Before applying for one, confirm that you won’t be adding more stress to your finances.

Second-position mortgages are lump sums, so the money will be deposited directly into your bank account. As for repaying the loan, most of these kinds of mortgages have fixed monthly payments.