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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 naturally 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 offers more opportunities than most Canadian homeowners realize.  

What is a second mortgage?  

Most Canadians understand that mortgage loans can be taken to buy a piece of property. Second mortgages are similar – it’s another loan taken against your home that you can use towards any purpose. However, the maximum amount to borrow is based on how much equity you own on your primary residence.  

Like first mortgages, a second mortgage is a loan that can be obtained at banks, alternative lenders, and some credit unions. However, qualifying for one can be challenging because of the expectations that traditional lenders set. Not only will your primary residence act as collateral, but having the right credit score and the right amount of income are requirements to get a second mortgage.  

With alternative lenders, though, if you own at least 25% of your property’s value, you’ll likely be eligible to take out a second mortgage as 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 70-80%. 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 second mortgages as a home equity loan

The purpose of your second mortgage can be considered a benefit. Regardless of how you use your funds, you receive a few other advantages. 

  • 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, second mortgages make a viable option for more significant expenses. Not only that, but your payments will go towards the principal instead of just towards the interest.
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Signs you need a second mortgage  

A second mortgage 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. Second mortgages 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. Those with a low credit score or high-interest debt may find getting a loan challenging. 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 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). Knowing what they are before comparing general concepts of second mortgages is important. 

  • 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)— similar to credit cards, but the spending limit is set by how much equity you have.    

Read more about home equity loans and HELOC. https://alpinecredits.ca/alpine-blog/9-reasons-for-getting-a-second-mortgage/

1st mortgage vs 2nd mortgage 

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

1st mortgage   2nd mortgage  
  • Used for buying a house  
  • Take repayment priority  
  • Interest rates depend on market conditions  
  • Profit after the sale goes to homeowner  
  • Flexibility of purpose  
  • Secured by your home equity  
  • Interest rates may be higher than the first mortgage  
  • Profit after sale goes towards 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 mortgages vs mortgage refinancing  

Another common financing option in Canada is mortgage refinancing. It allows you to access your home equity, but they are not the same as second 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 mortgages   Mortgage refinancing  
  • Doesn’t replace first mortgage 
  • More flexibility 
  • Fewer closing costs 
  • Change or keep primary mortgage lender 
  • Negotiate loan terms and interest rate 
  • Like first mortgage application 

Second mortgages vs home equity loans 

A home equity loan is classified as a second mortgage, but not all second mortgages 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  
  • Fixed or variable interest rates  
  • Various types of repayment terms   
  • Fixed interest rates only  
  • Can be obtained at alternative lenders like Alpine Credits  
  • 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 out 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 second mortgages. 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.  

Key takeaways 

  • Second mortgages and home equity loans are nearly interchangeable; you can find these loans at Alpine Credits.  
  • Homeowners who have some equity can access a second mortgage that they can use to consolidate debt, invest in business endeavours, or renovate.  
  • Compared to getting second mortgages at the bank, Alpine Credits only requires you to have enough equity.  
  • Home equity loans are the most versatile kind of second mortgage, but understanding other options is also important.  
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Frequently asked questions

Second mortgages are 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. 

You can get a second mortgage with alternative lenders despite a low credit score. Homeowners with some equity in their home can contact Alpine Credits to be approved for a home equity loan.

You can borrow up to 75% of your home’s values. 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 the market conditions and the lender. Second mortgages have fixed rates, and lenders may change the interest depending on various factors, such as the prime rate in Canada. Regardless, you can count on the interest rate to 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 mortgages are lump sums, so the money will be deposited directly into your bank account. As for repaying the loan, most second mortgages have fixed monthly payments.