03 Jan Higher House Prices in Ontario Leads to Increase in Second Mortgages
As house prices rise across Ontario home owners now have additional equity that they can use as collateral for a second mortgage. As reported in the Toronto Star “sales were up 18 per cent and the average transaction price was up 10 per cent in mid-December over the same time last year. The average selling price of a home in the first two weeks of December was $520,379, up from $471,602 as of mid-December of 2012, says TREB.”
This means that the average home owner now has almost $50,000.00 in additional equity in their property. Private lenders in Ontario base their loans on the amount of equity in your house as your equity increases you can borrow more money against your house. Since the average price increase was about $50,000.00 a home owner could arrange a second mortgage for a maximum of $42,500.00 which is 85% of the increase in equity.
The agents at Mortgagebrokerstore.com have noticed a significant increase in second mortgages based on increased home equity. Reducing interest payments is one of the best reasons to get a second mortgage, a lower interest rate allows the home owner to pay off their debt faster. Mortgagebrokerstore.com has also noted that many clients use a second mortgage to pay for home renovations that increase the property value.
The amount that you can borrow against your home equity depends on a number of factors such as the total equity, credit score, income, type of property and location of the property. Most second mortgages in Ontario have a maximum loan to value ratio of 85% in urban areas and a lower maximum in rural areas. Commercial properties usually have a lower loan to value ratio because it takes a longer time to sell a commercial property and the carrying costs such as taxes and insurance could be higher.
A house in a urban area where properties sell within 30 to 60 days can have a high loan to value because the property is similar to a commodity. The house will sell within a certain price range and within a certain price range therefore a private lender has a high level of confidence in the mortgage.
To determine if a second mortgage can reduce your interest payments and save you money please contact us via email at firstname.lastname@example.org or via phone at 416-499-2122 or 647-385-2122.