What Is a Second Mortgage in Vancouver?
When you buy a home and let’s say you put 20% down and borrow 80% mortgage. That mortgage is called a first mortgage as it is in the first position on the title of your property. If later you borrow more money secured by your house without paying-off the first mortgage, that mortgage is called a second mortgage as it’s charge shows up after the first mortgage on the title of your property.
So, the Second mortgage in Vancouver is when a homeowner already has a first mortgage and wants to borrow more money, in addition and on top of the existing first mortgage, using the equity in his home.
Second Mortgage Rate in Vancouver
To calculate your Second Mortgage rate in Vancouver, Crown Funding looks at the equity in your home. The rate will depend on the lender; how much equity you have in your home, and to what percentage of the market value or the LTV you are looking to borrow.
You probably have a lot of built up equity in your home if you have not borrowed in a along time, have made extra principal payments or have done renovations/improvements.
The rate for a private second mortgage does not depend on your credit or income. The rate for a private second mortgage from a private mortgage lender is strictly based on how much equity you have in your home and the type and the location of the property. The rates for a private mortgage is almost totally based on the LTV. The lesser the loan to value ratio (LTV), the lower the rate. The Second Mortgage rates at Crown Funding are usually in the single digits.
Types of Second Mortgages in Vancouver
One Year Fixed Rate Second Mortgage in Vancouver
The average second mortgage in Vancouver is for a one year term. This mortgage provides you with the capital you need to do whatever it is that you want to do; use the time to fix your credit or your income situation or meet any financial emergency.
However, so long you have been paying your mortgage payments on time, a mortgage in Vancouver can be renewed for another year and even longer.
We try to keep your interest and your monthly payments as low as possible here at Crown Funding. We even have an option of no monthly payments for a year.
Home Equity Line of credit
Another option would be to open a home equity line of credit. With that type of mortgage, you don’t have to take the whole amount right away, but it is available if you would need to do so. Crown Funding sets a fixed maximum amount you can borrow so you can take multiple smaller amounts until you reach that maximum amount. The same way you do with a credit card, you can pay back and borrow again over and over again as long as you stay within the limit of your credit line set by Crown Funding.
Second Mortgages in Vancouver
How Much Second Mortgage You Can borrow?
How much you can borrow in the form of a second mortgage in Vancouver on your home will depend on how much lendable equity you have in your home. Lendable equity is different from actual equity.
To find out how much equity you have in your house, you take the market value of your home and subtract the amount of the first mortgage. The balance left is your equity. For example, the value of your home is $1,000,000. You have a first mortgage of $600,000. $1,000,000 – $600,000 = $400,000. So, $400,000 is the equity you have in your home. However, you cannot borrow the whole $400,000 as that will be going to 100% of the market value. You can only use some of this equity to borrow additional money on your house in the form of a second mortgage.
How To Calculate Loan-To-Value (LTV) Ratio
The amount you can borrow on this $400,000 equity will depend on many factors and the type of lender you are borrowing the second mortgage from. Generally speaking, the max you can borrow on a second mortgage is 75% of the market value even though there are lenders who go up to 90% of the market value. This 75% of the market value is called loan-to-value (LTV) ratio.
If the value of the house is $1 million and let’s say you want to borrow up to 75% LTV or of the market value, then this is how to calculate how much you can borrow. 75% of the $1 million is $750,000. Subtract the first mortgage of $600K from $750K and you get $150K. So, in this particular case, you can get a second mortgage or a home equity line of credit for $150K.
It is a quick and simple way to raise capital for debt consolidation, home renovation or any other purpose or emergencies.
Common Uses of Second Mortgages in Vancouver
Once your second mortgage gets approved, it is up to you to choose how you want to use your money. The most common uses of a second mortgage in Vancouver are:
- Pay-off and consolidate your high interest rate credit cards into one low payment. Not only you will save a lot of money but your life will be easier, too. Paying the high interest rate credit cards is a good idea but closing them is not. If you are going to close some, then talk to one of our experts to make sure that it’s a good choice for you.
Renovation and Home Improvement
- A common reason to get a second mortgage in Vancouver is to renovate/improve your house. Renovation and home-improvement generally increase the value of your home by making it more attractive to the potential home-buyers.
- Private Mortgages are also called “Band-Aid” mortgages as they are for a short term. You can use Private Mortgage to buy time to fix your credit, meeting an emergency, or to tie you over for a while. Maybe you or your spouse is between jobs or you have some other emergency.
Crown Funding in Vancouver
Whatever the reason, if you need a second mortgage in Vancouver, Crown Funding is the place to go. Our team of experts will take the time to sit down with you to evaluate your needs and come up up with the right solution for you.