The more payments you make on your home, and the more real estate prices continue to rise, your home equity builds up along side it. However, if you want to transfer your extra equity to your bank account for your personal use, then getting a second mortgage is definitely an option you want to consider.
Understanding a second mortgage
To put it simply, a second mortgage is loan that gives you access to additional funds which come right from the equity in your home or property, when you have your first mortgage already.
This mortgage solution does not affect your current mortgage, as it’s considered to be an added separate debt against your home or property. If you default, legally your first mortgage get paid off first, and whatever’s left would go towards your second mortgage. This is why interest rates for second mortgages can be a bit higher.
Why you should consider a second mortgage?
Well, the one great benefit here is that you can benefit from your net worth that’s already built up in your property. Owning a property looks good on paper but it doesn’t provide you with access to money when you need it. You can invest these additional funds back into the current property to start a renovation project that can increase it’s value if you should so choose, or open up the doors to invest in other properties as well.
There are a number of other reasons why you should consider a second mortgage:
Do what you want with the additional money – Take advantage your home equity and use the money for whatever you need it for. Whether your reasoning is for other investments, home renovations or repairs, new business opportunities, payoff high-interest or accumulated debts, or just for luxury buys, leisure or fun, you can do with it what you choose.
No interference with your first mortgage – With interest rates continuously on the rise, Canadian property owners have been avoiding refinancing solutions for their loans. This prevents them from utilizing their property value to cash in. A second mortgage, will ensure that your monthly instalments on your first mortgage remain low, but still allow you to cash in on your property value.
Get approved easily – While refinancing poses many difficulties to homeowners with financial issues, a second mortgage depend on your home equity so getting approved for a second mortgage over refinancing is much easier.
If you find that refinancing isn’t a feasible option for you, we encourage you to learn more about property equity and second mortgages. They will provide you with a great benefit without interfering with your other financial agreements.