A second mortgage is a mortgage that is taken out on a property that is already mortgaged.
You can take out a second mortgage with either a financial institution or a private mortgage financing company.
Why go through a private mortgage financing company instead of a conventional financial institution?
There are several advantages to choosing a private mortgage financing company over a financial institution.
Your credit score doesn’t matter
First, the biggest advantage is that it doesn’t matter what your credit rating is. If you go through a bank for this type of mortgage loan, you generally need a credit score of at least 650 points. If you go through a private mortgage financing company to secure a second mortgage, your credit score has no bearing.
Did you use a bankruptcy trustee?
Secondly, your financial institution will refuse your request for a second mortgage if you declared bankruptcy in the past 5 years or you were not discharged from a consumer proposal, as this means that there is still a blemish on your credit report.
Private financing is much more flexible. If you still own your property, the fact that you have declared bankruptcy or have submitted a consumer proposal will not impact the decision of the private mortgage financing company.
No income verification
Another point worth mentioning is that, unlike financial institutions, private mortgage financing companies will not require an income verification. If you find yourself in a difficult situation (for example, you’ve lost your job), not needing to have your income verified can only be seen as a win-win situation.
Monthly payments: Just pay interest
Private mortgage financing companies also allow you a degree of flexibility when it comes to your monthly loan payments. Depending on the options you choose, you can reduce your payments considerably.
One option is to only pay back the interest over a given period. You won’t touch your capital amount, but at least you can reduce your monthly disbursements.
Example: One of our clients had a second mortgage for $25,000 with a financial institution. His monthly payments went up to $625.00. With Victoria Financial, his payments went down to $312.50, a reduction of 50%!
Why opt for a second mortgage?
There are many reasons why you might choose to take out a second mortgage loan.
You are in financial difficulty
If you are experiencing financial difficulties, a second mortgage gives you the chance to get back on your feet. Because you don’t have to provide a credit report or undergo an income verification, everyone benefits.
You can use the amount borrowed to:
- Consolidate any lingering debt;
- Adjust your credit;
- Mitigate the effects of being between two jobs and not having a salary;
- Help you if you have a work-related accident;
- Temporarily overcome the loss of a major client if you are self-employed.
Being able to make these and other related payments means you can maintain a good credit rating and you don’t have to worry about paying your creditors late payment fees.
You are starting a new business (or getting your business off the ground)
You could also benefit from a loan if you want to get a business started. Especially if you are transitioning between your current job and getting your new business started. A loan can also provide the money you need for an initial capital outlay.
Financial institutions need to know your income. Under situations such as these, they will not grant you a loan. Private mortgage financing companies can help make your business dream a reality. You can repay your loan at a rate that best suits your situation.
You are planning a renovation
Are you planning a major renovation project? You might need to take out a second mortgage to help cover the cost of materials and pay the contractors.
Renovations also increase the market price of your property. Your renovation is an investment that will help you build up the equity on your property. Later you can then refinance through your conventional financial institution, or resell.
Now you are familiar with the key benefits of choosing a private mortgage financing company over a financial institution. If you take on a second mortgage, do you still think you’ll go the conventional route?
If you would like more information on second mortgages, please don’t hesitate to contact me, either by email at maxime.st-laurent@financierevictoria.com or by phone at 1 (877) 220-7738, ext. 101.
