Second Mortgage Alliston

Second Mortgages in Alliston New Tecumseth

Call today for more information on a second mortgage in Alliston surrounding area:

(705) 717-5598        (416) 912-6200

Many clients looking for a second mortgage in Alliston, New Tecumseth and across Ontario are using second mortgages to consolidate high interest rate debts, renovate their homes or pay for unexpected expenses. Up to 95% “loan to value” second mortgages are available. [no_toc]

Apply online

A second mortgage in Alliston does not replace your existing first mortgage. It is a second position mortgage which is advantageous if you currently hold a favorably low rate first mortgage and do not want to discharge due to penalties, fees, etc. Second mortgages can also be arranged with greater ease due to the amount of lenders available both institutionally and privately.

Second mortgages are similar to, home equity lines of credit (HELOCs).

second mortgage alliston

 

Second Mortgages Bad Credit Alliston

Yes, we have lenders who will offer second mortgages for people with poor or bad credit. These second mortgages are often used for short term financing and can have interest only payments to further reduce your monthly payments.

Second Mortgage Rates Alliston

Rates on a second mortgage usually start a few percentage points higher that a first mortgage. The rate will depend on various factors such as your credit, loan to value, and even the area the property is located in. It should be noted that even though second mortgage rates are higher, the funds are generally used to pay off debt with much higher interest rates. Second mortgages are also used to consolidate debt until a first mortgage comes up for renewal – then both are consolidated into a new first mortgage.

What is a Second Mortgage?

A second mortgage is a loan that uses your home as collateral – similar to a loan you might have used to purchase your home in Alliston.

The loan is known as a “second” mortgage because your purchase loan is often the first loan that is secured by a lien on your home.

Second mortgages tap into the equity in your home, which you might have built up with monthly payments or through market value increases in Alliston.

Home equity loans and home equity lines of credit (HELOCs) are common examples of second mortgages. Some second mortgages are “open-end” (meaning you can continue to take cash out up to the maximum credit amount and, as you pay down the balance, can draw again up to the same limit) and other second mortgage loans are “closed-end” (in which you receive the entire loan amount upfront and cannot redraw after that).

The term “second” means that if you can no longer pay your mortgages and your home is sold to pay off the debts, this loan is paid off second. If there is not enough equity to pay off both loans completely, your second mortgage loan lender may not get the full amount it is owed. As a result, second mortgage loans often carry higher interest rates than first mortgage loans.

By taking out a second mortgage, you are adding to your overall debt burden. Anytime you add on to your overall debt burden, you make yourself more vulnerable in case you then experience financial difficulties that affect your ability to repay your debts. It is important to know that a major risk with home equity loans or home equity lines of credit is that if you cannot repay a home equity loan or home equity line of credit, you could potentially lose your home because you are using the equity in your home as collateral.

How does a second mortgage work?

A second charge mortgage allows you to use any equity you have in your home as security against another loan. It means you will have two mortgages on your home. Equity is the percentage of your property owned outright by you, which is the value of the home minus any mortgage owed on it.

Loans can come in several different forms.

Lump sum: a standard second mortgage is a one-time loan that provides a lump sum of money you can use for whatever you want. With that type of loan, you’ll repay the loan gradually over time, often with fixed monthly payments. With each payment, you pay a portion of the interest costs and a portion of your loan balance.

Line of credit: it’s also possible to borrow using a line of credit, or a pool of money that you can draw from. With that type of loan, you don’t ever have to take any money – but you have the option to do so if you want to. You’ll get a maximum borrowing limit, and you can continue borrowing (multiple times) until you reach that maximum limit.

Like a credit card, you can even repay and then borrow again.

Rate choices: depending on the type of loan you use (and your preferences), your loan might come with a fixed interest rate that helps you plan your payments for years to come. Variable rate loans are also available and are the norm for lines of credit.

What is the difference between a home equity line of credit and a second mortgage?

A home equity loan is a loan that is secured by your home. If you repay the loan as agreed, your lender will discharge the mortgage. If you do not repay the loan as agreed, your lender can foreclose on your home to satisfy the debt. Generally, the amount that you can borrow is limited to 80 percent of the equity in your home, although in some situations this amount may be higher. The actual amount of the loan will also depend on your income, credit history, and the market value of your home. The two distinct types of home equity loans are the home equity line of credit (HELOC) and the closed-end home equity loan, often referred to as a second mortgage.

A HELOC, which is the more popular loan, is structured as a revolving line of credit. You can borrow as much as you need, whenever you need it, by writing a check as long as your total borrowing does not exceed your credit limit. Because it is a line of credit, you make payments only on the amount you have actually borrowed, not the full amount available. Borrowers will usually set up a HELOC so that it is available for unexpected expenses. It may also be beneficial to use your home equity loan to purchase a car or pay your child’s college tuition, since the interest is generally tax deductible.

A closed-end home equity loan, or second mortgage, is a loan for a fixed amount of money that must be repaid over a fixed term, just like your original mortgage. Borrowers typically use closed-end home equity loans to pay for a single large expense, such as a major home improvement or college tuition.

Advantages of Second Mortgages

Loan amount: second mortgages allow you to borrow a large amount. Because the loan is secured against your home (which is generally worth a lot of money), you have access to more than you could get without using your home as collateral. How much can you borrow? It depends on your lender, but you might expect to borrow (counting all of your loans – first and second mortgages) up to 95% of your home’s value.

Interest rates: second mortgages often have lower interest rates than other types of debt. Again, securing the loan with your home helps you because it reduces the risk for your lender. Unlike unsecured personal loans like credit cards, second mortgage interest rates are commonly in the single digits.

Tax benefits: in some cases, you’ll get a deduction for interest paid on a second mortgage. There are numerous technicalities to be aware of, so ask your tax preparer before you start taking deductions. For more information, learn about the mortgage interest deduction.

Disadvantages of Second Mortgages

Of course, life is full of trade-offs. Be aware of the pitfalls of using a second mortgage. The costs and risks mean that these loans should be used wisely.

Risk of foreclosure: one of the biggest problems with a second mortgage is that you have to put your home on the line.

If you stop making payments, your lender will be able to take your home through foreclosure, which can cause serious problems for you and your family. For that reason, it rarely makes sense to use a second mortgage for “current consumption” costs such as entertainment and regular living expenses – it’s just not sustainable or worth the risk.

Cost: second mortgages, like your purchase loan, can be expensive. You’ll need to pay numerous costs for things like appraisals, origination fees, and legal fees to register the second mortgage on your home. Even if you’re promised a ‘no closing cost’ loan, you;re still paying – you just won’t see those costs transparently.

Interest costs: any time you borrow, you’re paying interest. Second mortgage rates are typically lower than credit card interest rates, but they’re often slightly higher than your first loan’s rate.

Second mortgage lenders take more risk than the lender who made your first loan. If you stop making payments, the second mortgage lender won’t get paid unless and until the first lender gets all of their money back.

Common Uses of Second Mortgages

Choose wisely how you use funds from your loan. It’s best to put that money towards something that will improve your net worth (or your home’s value) in the future – because you need to repay that loan.

  • There are situations when you may cash out some home equity using a second mortgage:
    • You may have accumulated a large amount of debt through auto loans, balances on high interest credit cards , credit lines and other bills (medical costs, kid’s tuition fees, etc.) and need to pay them off. This will help increase your monthly cash flow and reduce interest costs.
    • You may wish to repay and eliminate judgments, consumer proposals or unsettled collections. Also, you may want to payoff for your car loan, purchase a vacation property or plan for a vacation. You can obtain the required cash by taking out a 2nd mortgage loan.
    • There may be an opportunity for you to invest in stocks , mutual funds or business investments. You can then use a second loan to go for it. But check out if the rate of return on your investment is higher than the second mortgage rate. Only then it will turn out to be a profitable venture.

Tips for Getting a Second Mortgage

Get prepared for the process by getting money into the right places and getting your documents ready. This will make the process much easier and less stressful.

Beware of dangerous loan features. Most conventional loans do not have these problems, but it’s worth keeping an eye out for them:

  • Balloon payments that you aren’t able to budget for
  • Voluntary insurance that might duplicate coverage you already have (or give you coverage you don’t need)
  • Prepayment penalties that prevent you from paying off your debt early

If you are looking for a second mortgage in Alliston, and the surrounding area, contact us today.

About Alliston

Alliston is a settlement in Simcoe County in the Canadian province of Ontario. It has been part of the Town of New Tecumseth since the 1991 amalgamation of Alliston and nearby villages of Beeton, Tottenham, and the Township of Tecumseth.

How It Began

The majority of the land was purchased by William, John, and Dickson Fletcher. The three Fletcher brothers were dissatisfied with their life in England. They came to Toronto and later began scouting locations to build a mill. Finally, in 1853, a grist mill was built by the Fletchers near the Boyne River. Three years later, Orange Lodge was built, and the members decided to name the village Alliston. Though some may disagree on the origin of the name, it is widely believed that Alliston was James Banting’s birthplace in Yorkshire.

The Town Prospers

As time passed, the town grew. More and more of the Fletcher family began to thrive in Alliston. The family began to stimulate the town economy by starting more businesses in the area. A post office was built. George Fletcher became the town postmaster. George started the town newspaper, “The Alliston Star,” which later changed its name to “Alliston Herald.” George also became the reeve when the town was formally incorporated in 1874.

A year later, in 1875, the town was approached by the North Simcoe Railway. The railroad expressed interest in building tracks through Alliston and wanted Alliston to join the Toronto, Grey and Bruce Railway. Though this particular venture did not materialize, the railroad later proved to be a successful venture for the town of Alliston.  The organization set up to look into the potential of the railway later turned into the Hamilton and North-Western Railway. The town of Alliston successfully raised its portion of the funds. With expansion and blooming business, Alliston was upgraded from the status of “village” to “town” in 1981.

The Economy

The charming town has a lot to offer its residence. A small town feel and caring neighbors are everywhere. The town population of just over fifteen thousand people provides newcomers with a welcome feeling and gives residence a sense of closeness and community.

Potatoes are still a major commodity and provide stability for the town economy. About a third of the town works at the Honda manufacturing plants. The two plants were brought to Alliston in the 1980s and employ approximately 4,600 workers between the two facilities. The plants produce both vehicles and parts for the Americas.

Alliston is home to many thriving businesses. After the initial railroad ventures, a new line of the Canadian Pacific Railway reached Alliston in 1905. Alliston used to have its own electric company, Alliston Electric. Due to its success, Alliston Electric was merged into Ontario Hydro in May 24, 1918.

Alliston has a lot to offer its residents and visitors. There are two beautiful parks for people to enjoy. The Riverdale Park runs along the Boyne River and is to the north of the town. The PPG Park is to the south of the town of Alliston, near the local fire department. Most residential areas are to the north and south. However, in the mid-1990s, developments expanded to the northwest and southwest of the town.