Mortgages by Niels

Second Mortgage Bolton

A home based equity option to provide solutions to for a variety reasons: self employment, low income, emergency home repairs, or access to cash for an opportunity. A second mortgage is placed behind your first mortgage and based on the loan to value ratio that is available in your property. An appraisal will be done to asses today’s value of your property and with that we can asses what is possible for the loan amounts. Your GDS, TDS, and credit will be considered and will not be the main reason for being able to qualify. Our second mortgages Bolton team can have a look at what is possible for you.

    Is it a good idea to take out a second mortgage?

    A second mortgage can be a good idea if you have weighed out your short term and long-term plans and where financially you stand currently.

    A second mortgage can provide solutions for a variety of reasons: home improvements, debt consolidation, down payment on another home, or an investment opportunity to name a few.

    With all the listed reasons the biggest question to consider is how you will be able to exit your second mortgage.

    When the term is complete where will you have access to the funds to close the second mortgage. If you’re selling your home, you can close it upon closing date. If you’re repairing your credit throughout the term and preparing to be able to qualify for a refinance with an alternative ‘B lender’ mortgage at the end of the term. Using the funds to put down on a down payment on a new home and upon the sale of your current home you close the second mortgage.

    Placing the funds in an investment that you anticipate, creating the growth to later close the second mortgage. There are other reasons to take out a second mortgage and if this or the above examples are a good idea, call our experts to ask for advice and guidance.

    How much can I borrow if I already have a mortgage?

    Before we dive into the answering this question it is important to understand what ‘LTV’ loan to value ratio means. It is the relative difference between the loan amount and the current market value of a home.

    How you can check what the loan to value ratio is on your property you can take your current mortgage amount and divide it by the approximate value of your home today.

    Example: $500,000.00 mortgage on a $1,000,000.00 valued home, is $500,000.00 divided by $1,000,000.00, equals 0.5 x 100 to convert to a percent of 50% LTV ratio.

    Now if you’re able to qualify for the HELOC (home equity line of credit) you will be able to lend up to 65% and a total of 80% loan to value ratio, combined with your first mortgage.

    If you’re looking to add a second mortgage with a private lender there are lenders that will go up to as high a 95% loan to value. This is not the normal and most lenders will stop at 80% loan to value.

    For some lenders they’re comfortable with 85% loan to value in major cities and their suburbs nearby.

    A few things that lenders will consider when considering lending their funds are items like how you will be able to repay the loan, will this loan put you into a positive short term and long-term financial position, the state of your property, and what is the re sale appeal in today’s market.

    What is the process of getting a second mortgage?

    The process of obtaining a second mortgage is as follows:

    • The on boarding contact between the client & broker
    • The broker finding the best fit lender
    • Collection of required documents between client & broker, to the appraisal company
    • Stress test (if you’re applying for a HELOC, not for a private second mortgage)
    • The solicitors involved to bring you to the point of the closing date.

    Why Get a Second Mortgage Instead of Refinancing?

    The term second mortgage and refinance can be applied in similar ways. We will dive into what are the differences. When a homeowner has a first mortgage and chooses to ‘cash-out-refinance’ (often called a refinance), which you can up to 80% of your home’s value, a few things happen to their mortgage.

    You will receive the difference in cash what you were borrowing and how high you choose to go on your home’s value up to 80%. What also will happen is that you’re resetting your current mortgage term, rate and payment amounts.

    With a second mortgage you’re refinancing your home’s equity and there are lenders that will go as high as 95% loan to value (normal loan to value maximum is 80%), you then will also be receiving cash in difference of what your first mortgage amount is and how high you choose to go on your home’s value.

    The main difference is that with a second mortgage you will not be resetting your first mortgage. This can be a great benefit if you do not want to break the terms and rate that you have with your first mortgage.

    Unserviced Land LTV%
    LTV = Loan to Value 50%
    Serviced Land LTV%
    LTV = Loan to Value 65%
    Most Private Lenders Max LTV%
    LTV = Loan to Value 80%
    Most Major Cities and Suburbs Max LTV%
    LTV = Loan to Value 85%
    Some Lenders Max LTV%
    LTV = Loan to Value 95%
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