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Getting a Second Mortgage

Many people wonder about getting a second mortgage (it is also sometimes referred to as a home equity loan) for their property, but have no idea of how the go about this. There are a number of steps the homeowner or property owner should handle. The more of the items listed below that you can complete the better your chances of getting a second mortgage loan.

Below are some tips and suggestions, most people have already completed many items on the list.

1.      Get a good idea of the present value of your property, you can ask some local real estate agents to come and view your home. These estimates should be free of charge; you will need 2 or 3 estimates. This information will give you a price range for your home.

2.      Get all the papers related to you any present mortgages or liens that may be on the property. If you have any credit card debt you can also use the money to pay off these.

3.      Estimate your loan to value ratio (LTV) by dividing the amount owing by the value of the property. A low (loan to value ratio) LTV  means that you should be able to get a second mortgage fairly quickly, higher ratio LTV’s can be arrange but they do take longer.

4.      Find out what your credit rating is by going to Equifax or Transunion for your free credit report.  A good credit score will make it easier to arrange funding and at lower interest rates. A bad credit score may result in a longer time period to find funding.

5.      An appraisal is usually required and a property that looks messy in the appraisal pictures will have a difficult time getting the funding. Therefore clean up the house and outside areas, make your home look nice and clean. Fix and paint any broken wall areas, remove items on the floor.

6.      Contact a mortgage broker and find out if they can get home loan financing that you are looking for, of course we would like you to call us first.

7.      If the first broker says no he cannot help you, then try another one there are 1000’s of mortgage brokers to choose from.

8.      A private lender may wish to come by and inspect the property before they commit to financing a loan.

Now you have the basic information that will be required by most Canadian mortgage brokers.  You now can determine how creditworthy you are. A low LTV and a high credit rating means that you should be able to get financing under terms that are favorable to you.  A high LTV ratio and a low credit score rating means that you are a higher risk and the interest rates may be higher.

Understanding how creditworthy you are will put you in a better position to get the best possible dead on interest rate you will pay. You may also find out that you can borrow more than you thought. Try and have a realistic view of your situation since your home may have gone down in value.

*Please note that I have read a number of reports stating that getting your credit score from Equifax and  Transunion can be confusing, you may have to try a few times before you actually get the free version.

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