In determining the best rate 2nd mortgage as a Mortgage Broker there are a few pointed questions I must know:
- Where is the home located
- Property Type, IE. (House, Condo, Townhouse, Mobile Home, Co-op, Leased Land, Native Lease etc.)
- LTV – Loan to Value: (Generally the lowest 2nd mortgage rates come at a Loan to Value of 50% or less.)
- Income: Although 2nd Mortgages are primarily equity loan based lenders do want to see a likelihood of payment so determining ability to pay can be a factor in getting the lowest rate 2nd mortgage.
- Credit: Again second mortgages are equity loans and credit isn’t a major factor in getting approved. Credit however can indicate a likely hood to pay as well show a lender what needs to be done in your financial picture to get you back to a bank in the future.
- The Plan: Getting an idea what you are using the money for & an estimate of how long you will need the money for.
In most cases borrowers are unable to determine much about an offer other than the interest rate put on the offer sheet.
What are other factors to consider when obtaining the best 2nd mortgage rate?
- Second Mortgage should not to be confused with HELOC Rates or 2nd charge mortgages which are through a financial institution. These are Income, Credit & Debt Serviced qualified loans.
- Second Mortgages do come at a higher risk to a lender so Bank Rates do not apply.
- Broker & Lender Fees are commonly charged and in most cases get paid from the proceeds of mortgage.
- Legal Fees, in most cases there are two Lawyers/Notaries involved. Depending on the work required legal bills & all other costs generally come out to approximately $1,500. Case by case can have higher or lower results.
- Terms – Generally 2nd mortgages come with a 1 year term. Some lenders will do a two year term & in some cases three year terms are available.
- Not in all cases but in some a 2 year term comes with a bounce in rate in year two.
- The APR Annual Percentage Rate: The APR is the interest costs, plus the non-interest costs incurred to obtain the loan (not including value received items as outlined in the disclosure)expressed as a percentage of the average balance of the loan over the term. It is not the contract rate in the loan, which is used to calculate interest on the loan.
- Things to consider, what is the renewal fee? Some lenders have a set $300 or $400 renewal fee & others want a percentage of the total mortgage amount. This can significantly affect the cost of borrowing.
- NSF Penalties & Insurance Elapse Penalties – Some lenders will allow payments to be held with 48hours notice prior to deposit other lenders will not hold payments. Penalties can be as little as $50 and up to $400.
- Payment history – How is your payment history? Are you someone that from time to time has cash flow issues? Some lenders are flexible and understand that people go through some tough times & others have no patience for payment interruptions and will either not renew or demand to be paid out.
Now where does the rate come in to play? People come to me all the time shopping from different Brokers & different lenders rates. My job is to educate my client in hopes that they believe in my process & my years of experience.
Currently November of 2013 the lowest 2nd Mortgage Rate I have obtained for a client this year is 7.50% this was open with a 4% Broker Fee no lender fee.
Generally Rates Start at 7.95% to 8.25% for between 50% & 65% LTV in Major centers. (Conditions Apply)
Depending on LTV Loan to Value, rates can go up but from my experience general rates in the current market place are between 10% & 12%.
For more information or if you would like to get a no obligation quote please call me Jeff Di Lorenzo The Mortgage Group Canada Inc. 1-877-744-3436 (Brokers Welcome)