Homeowners looking for loans have an untapped resource in the form of a house. Getting a second mortgage in Toronto is one way to obtain a large loan at a good rate.
A second mortgage is precisely what it sounds like—a mortgage loan based on your first mortgage loan. Canadian homeowners can borrow up to 80% of the value of their home minus the amount owing on the initial mortgage.
At Northwood Mortgage, we work with homeowners across Ontario, providing various services as mortgage brokers.
One of the services that we offer is second mortgage solutions. Here, we’ll take a look at what it takes to get a second mortgage in Ontario, so you’re prepared for the process.
Building Equity
The first thing you’ll need for a second mortgage in Toronto is equity. Equity is the amount of value your home has that’s not tied up in your loan.
In other words, this is the portion of the first mortgage you’ve already paid off, plus any growth in the property’s value.
The following equation can evaluate equity:
Total current home value – existing mortgage = equity.
Some other factors are also considered, including your credit score and current debt-to-income ratio.
You build equity in your home by making payments on your mortgage. A large initial down payment is a good way to build equity quickly.
What You Need to Apply for a Second Mortgage
Applying for a second mortgage is much like the first, although the process is generally quicker. Your lender already knows the type of borrower you are.
The vetting process is mostly eliminated, apart from another check on debt-to-income ratio and other qualifying factors.
When you apply for a second mortgage in Toronto, you will need the following information/documentation:
- Identification and SIN
- Proof of income
- Changes to debt information
The biggest qualifying factors in the application process are your income and credit score. These two pieces of information tell your lender you can handle the second mortgage payments.
They need to understand this information because you’re still responsible for your first mortgage payments as well.
Choosing a Different Lender
At Northwood Mortgage, we sometimes get questions from clients about using a different lender for a second mortgage.
This is absolutely fine, provided the second lender approves your application.
As mortgage brokers, we work with lenders of all shapes and sizes. We work with traditional banks but also offer non-traditional financial solutions.
It’s important to us that our clients receive the best possible rates on a second mortgage. If you want to switch lenders, we can help you find the best one for your current financial situation and needs.
Contact Northwood Mortgage
A second mortgage can be used to finance a remodel, buy a second home, or refinance debt. They offer a low-interest solution compared to many other types of loans.
If you live in Toronto and want to look into second mortgage options, we can help. Call Northwood Mortgage at 1-888-495-4825 or contact us.
