Having a hard time paying the bills? You’re not alone - the COVID-19 pandemic has put millions of people out of work unexpectedly, and has created financial hardships that many can resonate with. With changes in restrictions happening every so often, the uncertainty surrounding business operations and job security is nothing new.
You worked hard to get where you are today and become a homeowner, whether that be in Vancouver or elsewhere in the Lower Mainland. With the ongoing pandemic thrown in and bills piling up, it may sometimes seem like a daunting task of staying afloat and keeping things in check. What do you do when you’re struggling to keep up with the bills and almost out of options? Here’s what you need to know about second mortgages and how they can help you find a way out.
What is a Second Mortgage?
First thing’s first, what is a second mortgage anyway? A second mortgage, also known as a home equity loan is a special kind of financing option for homeowners in Vancouver. When you take out a loan, there’s usually some kind of collateral that’s put up to secure the loan. Sounds familiar right? Well, when you take out a second mortgage, you’re essentially borrowing the money you need at this time against the value of your property. Essentially, you’ll be using your property as collateral to secure the loan - that’s how a second mortgage works.
What Can You Use the Money From a Second Mortgage For?
Some loans are very particular about what you can actually use the money that you’re borrowing for. When you take out a second mortgage from Silver Hill Mortgage, you have a tremendous amount of freedom in terms of how you can use the money.
Common reasons for folks taking out a second mortgage include things like paying unexpected bills that may come up, financing a large family expense, or paying for your children’s education. Life happens, and when it does, Silver Hill Mortgage is there to support by helping you access the money you need to get through these challenges with a home equity loan.
For example, medical problems can occur at any point in time which is what makes the resulting expenses so unexpected. While you’ve been saving away for your son or daughter’s education fund, you may have had a loved one fall ill which requires costly medical care. Sometimes you might not have the funds to address unexpected bills, in which case you can take out a second mortgage to help put yourself back on track financially.
Alternatively, many people use money from home equity loans to make improvements to their home and finance renovations. Folks with growing families who don’t want to move right away can use the money from a second mortgage to renovate their home to suit their needs.
How Does a Second Mortgage Work?
Now that you know more about the basic principles of second mortgages and what you can use the money from them for, let’s take a closer look at how they work. Everyone will have a different scenario, but the principles remain the same. That is to say, if you bought a home, you may be able to access up to 75% of its value, less the amount owing on your mortgage, in the form of a home equity loan, or second mortgage.
What does that mean for you? Check out our Home Equity Calculator to get an idea of your available equity. Unlike factors like income, the amount that you can qualify for under a second mortgage ultimately depends on how much equity you have to borrow against. To learn more about borrowing using your home equity, click here.
The Advantages of Taking Out a Second Mortgage
Second mortgages have many key advantages to offer, and if you use the money that you borrow wisely, you can end up doing better than ever. For one thing, the fact that there are no limits as to what you can use the money for is a huge advantage.
It’s your equity which means you can use it any way that you want. If you want to use that equity to finance a college or university education for your children, then by all means, do it. Likewise, if you want to use that hard-earned equity to buy yourself a new car for the family, you can do that too. That’s the kind of freedom that a home equity loan from Silver Hill Mortgage can help you achieve.
The list of advantages doesn’t stop there, second mortgages also tout lower interest rates than credit cards. One of the most common mistakes people make when they need cash fast is to charge everything to their credit cards until they’re all maxed out. When you max out all of your credit cards to conquer an unexpected expense like a medical emergency, you’ll be paying through the roof in interest on those cards. If you had gotten a second mortgage instead, you’d have a much lower interest rate on the loan than you’d find with any credit card.
Another advantage of second mortgages is the fact that you can typically borrow up to 75-80% of your equity. If you added up the total credit limit between all of your credit cards, you might be able to get a few thousand dollars. With a second mortgage - you can qualify for much larger amounts. It is important to note that the experience you’ll have taking out a second mortgage largely depends on who you work with. Have a question about second mortgages and live in the Lower Mainland? Get in touch with us and we’d be happy to chat.
Find the Silver Lining with Silver Hill Mortgage
Ready to take charge of your financial future? Then you’re ready to have a chat with us at Silver Hill Mortgage. We understand what it’s like to fall upon hard times, and that’s why we have such a strong reputation for helping people through similar situations.
If you think a second mortgage might be right for you, give Jim a call at 604.620.2697 to answer any questions you might have about getting started.
Silver Hill Blog
Jim Horvath is the principal broker and director of Silver Hill Mortgage Corp., arranging private mortgage loans in British Columbia for over 25 years.