With the mortgage rules constantly changing, private or alternative mortgages are becoming the only way some people can refinance or buy a home. When the banks turn borrowers down the next option is to look at “Subprime” lenders. There is a significant misconception applied to this “subprime” market, so let me explain them a bit.
In Ontario, a second mortgage on a property title will appear as a separate charge on that property but does not change the first mortgage. Since there is higher risk to the lender, taking a second mortgage typically has a higher rate of interest.
A second mortgage can allow homeowners to use the equity that they have in their home. If your first mortgage has high pre-payment charges, or a low rate, a second mortgage can be a better option than a refinance. This option may also be best for those who are self-employed, have bad credit, or for those in need of fast cash.
What are the Benefits of a 2nd Mortgage?
The following is a list of items you want to avoid doing when you are starting the process of applying for a mortgage.
1. Don’t apply for any new credit; Applying for credit will lower your credit score. You will lose a few points off of your rate and will also potentially change your borrowing ratios.
Renewing your mortgage should be easy, right? Absolutely, but there are factors to consider before signing on the dotted line.
Most people tend to just sign back the mortgage offer given to them by their existing mortgage lender, however, that may not be the best offer available to you. In fact, a study done by the Bank of Canada indicates that those borrowers who switched lenders at renewal, typically saved more money than those who remained loyal to their existing lender. (more…)