10 Things You Need To Know About Second Mortgages.

1. Jackie Woodward // Mortgage Broker // TMG
780-433-8412 // info@mortgagegirl.ca
Tweet @mortgagegirlca
10 THINGS YOU NEED
TO KNOW ABOUT
SECOND MORTGAGES

2. ¡ I don’t mean second mortgage as in getting a mortgage on a
second property; in this case I’m talking about a 2nd
mortgages behind an existing 1st mortgage for the same
property.
¡ Second mortgages aren’t for everyone so I’m going to
highlight what I think are the top 10 things you should know
about them to determine if one is right for you.
SECOND MORTGAGES
Jackie Woodward // Mortgage Broker // TMG
780-433-8412 // info@mortgagegirl.ca
Tweet @mortgagegirlca

3. ¡ A second mortgage is a great way to access any available
equity quickly without having to break the terms you presently
have in place for your first mortgage. This way you will avoid
any potential payout penalties associated with that first
mortgage.
1. GET THE CASH YOU NEED QUICK
Jackie Woodward // Mortgage Broker // TMG
780-433-8412 // info@mortgagegirl.ca
Tweet @mortgagegirlca

4. ¡ Basically you can get a home equity line of credit (HELOC)
secured by a 2nd mortgage behind your first mortgage OR a
2nd mortgage which is a separate loan on the property.
¡ The HELOC is limiting as it’s only available up to 65% of your
home value and has strict qualifying requirements while a 2nd
mortgage loan can usually go up to 80% of your property
value.
2. TYPES OF SECOND MORTGAGES
Jackie Woodward // Mortgage Broker // TMG
780-433-8412 // info@mortgagegirl.ca
Tweet @mortgagegirlca

5. ¡ If you are having problems qualifying for a 2nd mortgage with the
lender who presently holds your 1st mortgage or any other lender
for that matter, you may want to have a look at what private lenders
have to offer through a mortgage broker. As you are not dealing with
a large rigid institution, private lenders tend to be more flexible
when it comes to qualifying and will work with you to find a solution
that works for both you and them.
¡ Keep in mind they lend on a smaller scale so while their qualifying
guidelines and document requirements are a bit looser, they tend to
be more selective about the property they use to secure the
mortgage.
¡ Talk to your favorite mortgage professional about how second
mortgage lenders products are different than going through a
typical first mortgage lender.
3. PRIVATE LENDERS HAVE LOOSER
QUALIFYING GUIDELINES

6. ¡ While the HELOC usually comes with favorable terms like
interest only payments, an open term and a low variable
interest rate, as mentioned above, they are restrictive in their
loan-to-value and qualifying guidelines.
¡ Private second mortgage lenders on the other hand are more
adaptable though as they would not be paid out first in the
event of a sale or a default, they are essentially taking on a
greater risk and as a result charge higher interest rates and
upfront fee.
4. HIGHER RATES AND FEES
Jackie Woodward // Mortgage Broker // TMG
780-433-8412 // info@mortgagegirl.ca
Tweet @mortgagegirlca

7. ¡ Private lenders usually consist of an individual or group of
individuals lending their capital out in the form of real estate
secured financing also known as mortgages.
¡ As private lenders are not a bank, they are not governed by
the usual bank rules and can lend to higher loan-to-values,
ask for less qualifying documentation and charge higher
renewal and payout penalties at their discretion.
5. WATCH OUT FOR RENEWAL FEES AND
INCREASED PAYOUT PENALTIES
Jackie Woodward // Mortgage Broker // TMG
780-433-8412 // info@mortgagegirl.ca
Tweet @mortgagegirlca

8. ¡ I recommend only using a second mortgage as a short-term
financing solution.
¡ Higher interest rates, coupled with larger penalties and fees
should propel you to find a less expensive financing solution if
possible. Though if you have no other options available to you,
know exactly what you are getting into and find out what is
necessary to avoid private lending next time.
¡ You may need to fix your credit or aggressively reduce your
mortgage amount in order to build enough equity to eventually
combine the 2 mortgages into only one at a good rate with a
reasonable payment amount.
6. SHORT TERM IS BEST

9. ¡ Most importantly, there has to be sufficient equity in your
home to support a 2nd mortgage as the “A” lenders will only
allow you to refinance up to 80% of the homes present value.
¡ If you are in the first year or two of a closed fixed rate
mortgage term there may be a large penalty involved in
refinancing that first mortgage in order to access more equity.
Conversely, if current interest rates are lower than the rate on
your existing first mortgage, refinancing and increasing that
1st mortgage may be the best choice for you.
¡ I would ask your mortgage professional for some cost
calculations that should help you with your decision on how to
obtain that equity.
7. WHEN WOULD TAKING A 2ND
MORTGAGE MAKE SENSE?

10. ¡ If you have a second mortgage on your home, you are third in
line to benefit from any equity available once the property
sells after paying all costs associated with the sale including
any real estate fees. Your first mortgage holder gets their
mortgage balance owing, then the second mortgage is paid
out with you receiving the remainder.
¡ Second mortgage financing reduces the equity you have in
your home and you should keep that in mind if you’re selling
soon and want to maximize your profits earned.
8. ONE, TWO, ME
Jackie Woodward // Mortgage Broker // TMG
780-433-8412 // info@mortgagegirl.ca
Tweet @mortgagegirlca

11. ¡ If you’re looking for a Home Equity Line of Credit, visit your
personal banker as well as a mortgage broker to explore the
options available to you as not all HELOCs are the same. I
mention this as some lenders have what is called a “bundled
product” which allows you to access home equity a number of
different ways under one umbrella. This could include lines of
credit or various credit card accounts along with a mortgage.
When it comes to private financing, who you know matters
more than what you know.
¡ Access to multiple private lenders instead of just one or two
optimizes the best solution for your financing needs and
working with a mortgage professional who has experience with
both private and second mortgage financing is a suggestion I
would make.
9. WHO YOU KNOW MAKES A BIG
DIFFERENCE

12. ¡ It is usually the intention of a majority of homeowners to pay
down their mortgage balances as quickly as possible and a
second mortgage can only cause delays in reaching that goal.
¡ Before you commit to second mortgage financing, ensure you
have an exit strategy planned in order to protect your assets.
¡ Work with your mortgage professional on a plan that either has
you paying off the 2nd mortgage financing quickly or to have an
eventual refinance solution in place to avoid the renewal of your
second mortgage multiple times.
10. HAVE AN EXIT STRATEGY
Jackie Woodward // Mortgage Broker // TMG
780-433-8412 // info@mortgagegirl.ca
Tweet @mortgagegirlca

13. JACKIE WOODWARD
MORTGAGE BROKER // TMG
PHONE: 780.433.8412
EMAIL: INFO@MORTGAGEGIRL.CA
VISIT: WWW.MORTGAGEGIRL.CA
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