A second mortgage is a loan that is secured by a property that already has a first mortgage on it.
The home or property may have multiple mortgages secured against it. The mortgage lenders must be paid off in the same order in which the mortgages were placed on the property. When a property is sold, a first mortgage must be fully paid off before the second mortgage lender can receive their money. Learn more about Second Mortgages
Private borrowers are individuals or companies that make money by investing in real estate. These lenders are unregulated and do not face the same government restrictions that impact banks, credit unions, and trust companies.
Private lenders in Ontario can lend the money in the form of a mortgage secured against a piece of real estate.
In real estate, equity is defined as the difference between the current debts secured on a property and the property’s market value. A home equity loan is a kind of loan where the equity in a home is the primary qualification criteria. Home equity loans are typically issued as mortgages that are secured against a piece of real estate.
Private lenders will look at the equity in the property instead of using a credit score to approve mortgage requests.
Since a bad credit mortgage carries a higher default risk, borrowers should expect higher interest rates and fees.
Private mortgage lenders are a common source of loans for people with bad credit. As with any mortgage in Ontario, if the borrower fails to make payments the lender can sell the property to recoup their investment.
A reverse mortgage is a special type of mortgage available only to homeowners aged 55 or older. This type of mortgage will provide the borrower with an initial lump sum, then additional monthly sums throughout the life of the mortgage. The only officially government-endorsed providers of this mortgage type are HomeEquity Bank and Equitable Bank.
A power of sale effectively allows the lender to sell the property if the borrower defaults on the mortgage. The most common reason for default is the failure to make mortgage payments, but other reasons include failure to pay property taxes and failure to insure the property.
The ability to process a power of sale is part of the Ontario Mortgages Act and is the most common solution for mortgage lenders looking to recoup their investment.
Both legal remedies, power of sale and foreclosure, can be stopped while the title to the property remains in the borrower’s name.
Power of sale typically takes 3-4 months to process while foreclosure takes a year or longer. Foreclosure is considered to be a harsher remedy since it does not allow the former owner any profits from the sale of the property. The most common way to stop these mortgage actions is to pay the lender the amount they are requesting. This is usually done by getting a new mortgage or by selling the property.