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Homeowners are lucky to have a roof over their head and equity in the bank, but they face considerable financial pressures and are far from being out of the woods. Rising interest rates make borrowing more expensive, while grocery chains charge more for pantry staples even amid record profits.
Inflation is also driving costs. All this is to say, homeowners everywhere are looking for relief. Taking a second mortgage can be an excellent way to stabilize your finances. But before you do, there are a few things to know.
It’s Common, In Fact
A second mortgage may seem daunting, but it’s a very common way for homeowners to access large sums of badly needed money. If you’re looking for second mortgages in Ontario, the right mortgage broker can pair you with a quality second mortgage lender no matter what your credit score.
Don’t feel guilty, as if you did something wrong, for needing financial assistance. Thousands of people take out second mortgages to avoid bad credit or get quick cash on favourable borrowing terms to pay for a home renovation, emergency repair, education, and more.
Know Your Alternatives
A second mortgage can be a great way to leverage your home’s equity to access money, but it isn’t the only method. A home equity loan or home equity line of credit (HELOC) can better suit your finances and lifestyle.
A home equity loan is one lump sum payment you borrow at rates based on the difference between your appraised home value and the amount left on your mortgage. A HELOC is similar, except it’s a revolving line of credit, so you only pay back what you borrow as you borrow it.
These two options can be quite flexible, so speak to your mortgage broker about setting up the right terms for your budget and lifestyle.
Make Your Payments
Leveraging your home’s equity can help you access great lending terms to get a cash injection. However, don’t take it lightly. Putting your home up as collateral means that non-payment carries the risk of losing your home.
That’s why people tend to use second mortgages to access money to reinvest back in their home, in the form of renovations that, in turn, make their home more valuable. If the increased value outpaces what you put in, it will pay for itself.
If you take out a second mortgage for things like vacations or a car, make sure you can manage the payments. A second mortgage and things like HELOCs or home equity loans are excellent financial tools, but they’re not to be used like a credit card.
Leveraging your home’s value when you need extra money is smart, so long as you’re controlled and strategic.
As living costs rise, people need to find their own path for financial relief that aligns with their lifestyle and budget. An experienced mortgage broker who has your back is an indispensable resource for homeowners, so keep the above in mind and speak to them before initiating a second mortgage.
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