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Second Mortgages – Cash from Property Equity

Second mortgages are in fact short term loans that typically run from one to five years. People usually make these loans to improve their property or to consolidate expensive debt. Granted second mortgage interest rates are usually higher than the interest rate on the first mortgage, but they are still a lot less expensive than other forms of debt such as credit card debt that attracts interest rates of almost thirty percent. Second mortgages are also handy for entrepreneurs who wish to grow their businesses by converting the equity tied up in their fixed property into cash.Private lenders have become conscious of the fact that conservative lending rules used by conventional lenders and banks exclude many potential homeowners who are actually able to pay back loans. Bear in mind, private mortgage lenders mostly take into consideration a property’s overall value and salability as opposed to merely the borrower’s credit history.

Second Mortgages – the Preserve of Private Lenders

Generally speaking conventional banks are not active in the second mortgage industry so second mortgages are usually the preserve of private lending companies. The most efficient way to find a private lender is to contact a mortgage broker. These intermediaries usually have a broad spectrum of loan providers on their books and they can match your requirements with the best private lender. Since they are familiar with the industry they may even offer suggestions or promote products that you may otherwise never have heard of.
Private lenders are a lot more flexible than conventional banks and they can offer applicants customised products that can include interest only payments. They are customer friendly and you will have a chance to speak to them about your requirements so that the product that you finally agree on is tailormade to your needs.
Because private lenders are not regulated by government or by Central Banking requirements, they are able to waive some of the requirements for credit worthiness. Private Mortgage providers are more interested in the market value of the property that will stand as collateral for the loan than they are in the business of the borrower. They do however have some requirements as they have to protect their own businesses.

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Criteria for Second Mortgages

Most private lenders will not offer a mortgage where the value of the mortgage equals eighty percent or more of the appraised value of the property. If the borrower has put a down payment of at least twenty percent on the property the private lender is much more likely to approve the second mortgage. When applying for a second mortgage it is likely that the private lender will scrutinise the income of the applicant to satisfy himself that the borrower is capable of servicing the loan.

Private Mortgage Lender’s Interest Rates

As previously stated a second mortgage is riskier than the first so it follows that the interest rate on these loans is higher than rates charged on conventional mortgages. The annual interest rates on second mortgages can vary from seven to thirteen percent. The borrower will also be liable for mortgage initiation costs, which can include appraisal costs, legal fees, broker fees and lender fees. These are sometimes included in the loan so that they don’t have to be paid at the start of the contract.

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Afton Jaskolski

Getting a private mortgage was not easy to be honest, but at least with Mr. Leon it was doable. Thank you for your help!

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My wife and I decided to refinance our mortgage and started looking for a mortgage broker in Toronto. There were so many options, so you can imagine how overwhelmed we got! After talking to Leon we decided to proceed with Certified, didn't regret that decision once. They always gave useful recommendations, were attentive, and constantly in touch. And most importantly (for us) they helped us to save some money!!

Lucy Zimmerman

Vita was great. Helped my son with all the paperwork and got him very good interest rate. On the closing date called to follow up if everything went fine. Quite a pleasant experience. I would recommend this firm for anyone who is looking a mortgage broker.

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