Second mortgages are just what they sound like, if you already have a first mortgage then the second for foreclosure purposes is in second place. The second mortgage is usually facilitated by a private lender although occasionally we will see one come from the bank who has the first mortgage.
Second Mortgages are based on the appraised value of a property and can go to as much as 85% of that value but most will only go to 75% in major cities. While regular first mortgages look at going to 44% of your debt servicing ratio, most second mortgage lenders will consider higher debt ratio’s as they are more interested in the equity in the property than the actual debt ratios.
Second mortgages also come with a higher interest rate which is in correlation with the higher risk taken on by the private lender. You may find that the rates on a second mortgage can be as high as 16% in some cases and that number adjusts the higher the percentage of the appraised value. An example would be that at 75% you may see a 12% mortgage rate and at 85% of appraised you will see 16%.
The reason most people would look at a second mortgage in Calgary is that perhaps the bank already thinks you have too much credit and won’t extend past the current amount of mortgage that you have in place. In some cases self-employed individuals will seek out a second mortgage to help finance a business venture that the banks won’t approve.
Second mortgages, because they come from private lenders in Calgary are sometimes used to help pay out revenue Canada as private lenders are not as opposed to that as your bank. Sometimes we see people taking second mortgages so that they can purchase their next home knowing that the current home will be paid out as would the second mortgage be at that time.
Applying for a second mortgage in Calgary usually starts with the basic application and then we can decide if a second mortgage is something that will work for you. The next step is in determining the value of the property by an independent appraiser, this number will set the parameters for how much money we will be talking about. From there the file is packaged to send to the private lender that we think will be the best fit for your file.
Brokers for Life has several agents who are well versed in the private mortgage side of our business. It is something that not all mortgage brokers have experience in and if they have to send your business to a third party then they may not be the right agent for your situation.
Brokers for Life takes pride in the fact that not only do we know the private lenders well but that we also have contacts with private individuals who lend their own money for private first mortgage and second mortgages in Calgary.
Second mortgages fit well with our motto “Real Life Mortgage Solutions” because sometimes life gives us situations that only a second mortgage can resolve.
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