“Rebuilding your credit for home and cottage living, one step at a time”

A second mortgage can be a good idea if you are in the right situation for it. Just like any other major mortgage decision, the first step is understanding the details of this unique financial contract and how to go about qualifying yourself.

Second mortgages are not just for paying off debt and can become your gateway to financial freedom. With an approval rate of nearly 100% and no income verification, hard times don’t have to happen.

Your home has value and over time it can gain that value as a property asset. The equity of your property can rise over time due to home renovations or neighborhood improvements to the surrounding areas. A 2nd mortgage allows a homeowner to borrow large funds while using their home as collateral.

A number of Canadian citizens have a hard time dealing with the major banking institutions when it comes to finances and mortgages regarding their owned properties. Private mortgage companies remove the tedious procedures of banks and will most likely not even look at your overall GDS or TDS ratios.

Need more information on a 2nd Mortgage? Most of the time, your qualification is determined through what is called ‘The LTV Formula’. Here is some information on the LTV formula, citing two general examples to give you an idea of how it works.

The LTV formula (Loan-to-Value): Loan to Value (LTV) is monetary terminology used by the Canadian banks and private mortgage lenders to show the ratio of a mortgage to the worth of the current homeowner’s property. You divide the amount of security by the value of the home giving us an idea of how much a private mortgage brokerage would be able to lend you. Please keep in mind these numbers are subject to change and very fluid based on the economic landscape.

Property example #1 is a home valued at $350,000 with a mortgage of $175,000. You would be sitting at 50% LTV. That means with a lending cap to 85%, a private broker will be able to potentially get you $122,500.

Property example #2 brings us to a cottage valued at $200,000 with a mortgage of $127,000 would have you sitting at 63.5% LTV. That means with a lending cap of 75%, because it is rural, your mortgage agent will potentially be able to get you $23,000.

Whether it is understanding how to qualify, or discussing a proper method of payment and financial plan for the future, always remember a second mortgage is not just to pay off debts!

Always be sure to speak with a licensed professional before embarking on any major financial decisions. Finding a company that puts you first and keeps the client and their situation in mind is what matters.

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