With the COVID-19 pandemic affecting the overall income of most households, it is wise to re-evaluate your financial plans to ensure that you’re able to pay your debt and retain your assets. This is particularly useful if you’re anticipating additional expenditure or a decline in your monthly income.

If you are looking for ways to reduce your overall debt or restructure your monthly payments, you can look into a home equity loan.

Obtaining a second mortgage, by leveraging your home equity, is a very practical solution that many homeowners in Canada opt for.

What is a second mortgage?

As the name suggests, a second mortgage is an additional loan taken on a property that is already mortgaged. It is secured on the basis of your home equity.

• Second mortgage is behind your first mortgage, so if you like your first mortgage rate or are currently locked into the first mortgage – a second mortgage enables you to unlock equity without any disruption to your first mortgage.
• A second mortgage opens you up to more lenders – because second mortgages are smaller, there are more lenders offering them including private lenders.
• Second mortgage lenders often lend based on equity and not your credit and income. So, if your credit is bruised or you are self-employed, you can still get the help you need.

How much equity is needed to get a second mortgage?

Lenders use a calculation called Loan to Value (LTV) ratio when deciding how much of your equity they will loan you. Generally:

• If you have a strong income and decent credit you can borrow up to 80% of your home equity.
• If you have poor credit, limited time on the job, or income that can’t be proved – then you can borrow up to 65%-75% of your home equity.

While banks offer second mortgages – it is always best to go through a mortgage broker for this type of financing. This is because many lenders who offer second mortgages don’t lend to the public directly and only work through brokers. Some of the advantages of working with a broker include:

• A broker is able to look at your financial profile and know immediately which lenders will work with you. This makes the approval process faster.
• A broker has an in-depth understanding of the mortgage closing process where secondary financing is concerned and will be able to expedite your closing more efficiently.
• Brokers who offer finance and debt consulting will be able to offer other financial solutions if, for some reason, you can’t get the mortgage.

So, is a second mortgage right for you?

At DebtCare Canada, we can help you evaluate your options and explore a variety of different solutions. There are a number of ways to deal with debt and it is vital to create a well-thought-out plan to eliminate your debt for good.

Special situations, like the current pandemic, call for special resources. We have access to private mortgage lenders that don’t lend directly to the public and only work through brokers. Contact us today to discuss your options – including second mortgages, home equity loans, HELOCs, and more.

Contact us today for a free consultation. Call or text 1-888-890-0888 or visit www.debtcare.ca.