All across Canada, property values have increased over the last few years, which means many homeowners have an untapped reserve of wealth in their real estate thanks to increased home equity.
If you are a homeowner in search of some new financial flexibility, you are missing out on an opportunity if you are not using your home equity to your advantage.
Leveraging Home Equity
If you are a homeowner, you may be able to borrow money secured against your home’s existing equity. Not all financial institutions offer home equity financing options, but with the right lender you could be eligible for a second mortgage, either in the form of home equity loans or home equity lines of credit. People tend to use their second mortgages for home improvements or consolidating high-interest credit card debt, but you can use your financing however you see fit.
Second Mortgage Rates & Qualification
A second mortgage is a loan that you take on your home, secured against your home equity. This means that your home is still used as collateral, just like with first mortgages, and it does not exempt you from your first mortgage obligations.
In order to qualify for a second mortgage, lenders will evaluate the following information.
Home Equity
The larger the amount of home equity you have, the more likely it will be that you can qualify for a second mortgage.
Credit Score
In general, a good credit history will lead to favourable mortgage rates. A lender will offer someone with a high credit score lower interest rates than borrowers with bruised credit.
How Much Will a Lender Approve for a Second Mortgage?
The amount of funding someone can expect to receive through a second mortgage depends on how much equity they have in their property.
Lenders have restrictions on the loan-to-value (LTV) ratio of second mortgages that limit homeowners to borrowing against a certain portion of their home equity. In general, second mortgages can be for up to 80% of home equity.
A second mortgage is a useful financial tool, one that can help homeowners in a variety of ways. Many people use their financing to pay off their credit cards or other loans and improve their financial situation. Getting a second mortgage is a great way to make the equity you have built up in your home work for you.
Find the Right Lender
Alternative lenders have greater flexibility than many financial institutions. If you are interested in taking advantage of your reserve of wealth and getting a home equity loan, speak to a Tribecca lending specialist to discuss the best option for you.
