There may come to the point that you will really be needing money and you might consider a second mortgage. If you buy a house, the first mortgage you get on the house is the primary lien not until you pay off the mortgage. Nonetheless, once you gradually build up a particular amount of home equity by making payments on your mortgage, you’ll be able to take on the second mortgage on the house. As a matter of fact, a second mortgage Ontario is when you lend more money on your home equity as a second loan instead of refinancing.
Many individuals who are taking this second mortgage on their house have to be questioning themselves which is much better: refinancing the first mortgage or taking on a second mortgage? There are some important facts about the first mortgage refinancing and second mortgage you must know prior to making a decision of choosing the best option for you.
Important Facts of Second Mortgage
The lender who gave the original mortgage on the house has more priority over the new borrower of the second mortgage.
Taking on a second mortgage has basically similar processes as getting a purchase mortgage. You should first complete all the requirements such as financial paperwork, get a home appraisal, personal information and provide the new borrower all the needed details for them to identify if the loan may be approved or not.
There are several fees involved with getting a second mortgage. You’re getting the whole new loan and will be paying the closing costs, appraisal fees, loan origination fees, with the first mortgage.
In addition to that, the second mortgage can be harder to get. When you refinance the first mortgage, the borrower understands that they will have the first claim on the property should the loan be foreclosed or default. With the second mortgage, the borrower is also aware that when the original mortgage forecloses, they will be paid with what they’re owed first as well as the remainder will be going to the subsequent holders of the mortgage.
Having a second mortgage simply means that you’ll have two sets of monthly payments rather than just one. Furthermore, you will have to pay your first mortgage and make the payment for the second mortgage every month in order to avoid foreclosing your mortgages.
Second Mortgage Benefits
There are a lot of advantages to getting a second mortgage instead of refinancing. The most essential reason is when you have a low original mortgage rate however, rates are now much greater. But every case differs and whether a refinance or a second mortgage is perfect depends on your current financial status. There are a lot of differences between refinancing and second mortgages. Depending on your own current personal financial status, one may be beneficial than the other. It’s more important to know how a finance differs from a second mortgage.
There are also many fees involved in refinancing. You will be needing to pay all the fees associated with getting a mortgage which include an appraisal fee, loan original fee, points on new loan, title fees and many more.