Qualifying For a Second Mortgage In BC

2nd Mortgage Approvals Regardless Of Income Or Credit

Second mortgages are loans on the title of your home. Registered behind your first mortgage, they allow you to refinance up to 70% of your home’s value. 

2nd mortgages are used for debt consolidation, home renovations, or business capital. They can provide you with significant cash flow relief by combining all your small debts into one low monthly payment. 

When working with us, approvals can take as little as 24 hrs. We have great second mortgage rate options for lower Loan To Value (LTV) ratios. 

The major difference between an equity mortgage and a home equity line of credit lies in the rates and fees. Home equity lines are also a re-advanceable charge, where a home equity loan is a one-time lump sum advance of money. 

Worried about age, bad credit, or income? Don’t be! We can provide you with 2nd mortgage solutions solely based on the value of your home.

 

How To Calculate a Second Mortgage

Want to estimate how much of a 2nd mortgage you might qualify for?

2nd mortgage calculation

Get a calculator! Here’s how you calculate up to 75% Loan To Value:

75% x ($300,000) = $225,000 – ($200,000) = $25,000

Some lenders will go as high as 85% LTV. You should call your Vancouver BC Mortgage Broker to help you prepare your Mortgage Application.

 

Top Reasons For Getting a Second Mortgage In BC

1. Refinancing Debt At Better Rates

Let’s say your current mortgage interest rate is lower than it would be if you refinanced and added additional debt. If you look to consolidate outstanding debt into a new first mortgage, it may become more expensive than to get a second mortgage.

Taking $50,000 of debt, and refinancing it into a 2nd mortgage at private mortgage rates, may cost less than taking a $300,000 1st mortgage, and adding $50,000 to refinancing $350,000 at your bank’s best rate.

2. Buying a New Property Before Selling Your Home

This is also considered Bridge Mortgage Financing. You can use the equity in your home to buy another piece of real estate using Inter Alia.

3. Credit Issues Restricting You From Qualifying For The Lowest Discounted Rates

Sticking with your current 1st mortgage rate and consolidating debt into a second mortgage can help improve cash flow and consolidate outstanding debts. By using this technique, you can improve your credit and be in a better financial position to negotiate the best rate from your bank at the end of your term.

4. You Are Self-Employed And The Bank’s Debt Service Ratio Is Too Restrictive

If you are self-employed, the bank’s debt service ratio might be too restrictive to fully qualify you. Many banks will only allow certain debt to service ratios. A 2nd mortgage from private mortgage lenders can sometimes help you achieve a higher loan to home value.

5. The Bank Won’t Finance Your Unique Property Or Location

This happens when you have a unique property or location and the bank is unable or unwilling to finance it adequately. Non-conforming homes and homes on unique properties pose challenges for conventional lenders to service to their true potential.

6. Issues Providing Proof Of Income

A second mortgage is based on your home’s equity. Some lenders can qualify you solely on those bases.

7. You Are Behind On Your 1st Mortgage Payments

If you are facing a possible Foreclosure or Pre-Foreclosure, a second mortgage can help bring you up to date with your 1st mortgage. It will also enable you to restructure your other debts. A restructured cash flow allows you to better service payment in the future.

8. Looking To Start a New Business Or Working Capital

A 2nd mortgage can free up money so you can start a new business or working capital. Banks can have overwhelming guidelines for this, so home equity loans are a fast way for small and medium-sized business owners to get money.

9. Construction Draw To Complete a Residential Project

Are you having trouble completing a residential construction, and the bank won’t advance money for it?

Some lenders will advance a second mortgage to help you complete your project.

10. Dividing Assets After a Divorce

Second mortgages can also be used to divide assets following a divorce or to pay alimony. Using equity to divide assets and obligations can be done easily. Just ensure that all obligations on the 1st mortgage are fairly decided on before entering under contract.

 

What Are Home Loans Used For?

Mortgage loans can be used to enhance your current lifestyle. You can take a loan for your wedding or honeymoon, buy a new car, or go on a vacation. Some people use mortgages to consolidate debt or to pay medical bills, education or school loans. 

Most commonly, mortgage loans are used for home improvement. Other uses for a first or second mortgage include starting a small business or injecting new money into an existing one with the flexibility of interest-only payments. 

A mortgage is one of the fastest and easiest ways to extract equity out of your home.

 

How Does a Second Mortgage Work? 

Wondering what is the difference between a first and second mortgage? A 2nd mortgage typically refers to a secured loan subordinated to the 1st loan against the property. 

In real estate, a property can have multiple loans against it. The loan registered at the BC Land Titles Office is called the first mortgage, or first position. The mortgage registered second is called the second mortgage or home equity loan. Properties in Canada can have a third or even a fourth mortgage, but those are less common.

icon of house stop foreclosure

Canadian second mortgages are also called equity mortgages because if the loan goes into default, the first mortgage gets paid off first. Thus, these types of mortgages are riskier for lenders and generally come with a higher interest rate.

Often, 2nd mortgage rates can be more cost-effective than paying out your 1st one and refinancing because of the payout penalties. Sometimes, taking out a second loan and negotiating an open rate on it can be your best bet, even if paying a higher interest rate. 

Most lenders will require a lender fee when initiating an open mortgage rate. All fees and costs have to be disclosed to you prior to signing your mortgage.

 

A Home Equity Loan Can Help Improve Your Credit

A second mortgage can also be a great tool to repair your credit or help with cash flow. If your credit is low and your primary mortgage is up for renewal in the next year or so, getting a 2nd mortgage may help your credit score to improve. 

Managing your debt and keeping repayments up to date gives you a good chance of renewing your mortgage and consolidating both into one. All with a combined lower payment and interest rate.

 

Equity Mortgage & Home Equity Line

Both home equity mortgages and HELOCs are 2nd mortgages taken against your home equity. 

A home equity mortgage is a fixed-rate loan most of the time, while a HELOC is an adjustable-rate loan. The former allows you to take all the loan funds in a single payment, while home equity lines of credit offer a credit line option from which you can get advances up to your credit limit.

The purpose of these loans is also different. For example, if you wish to consolidate debt, you should choose a second mortgage. If you were to make home improvements, then a HELOC would be a better option. All you need is a basic understanding of both loans to make them work for you

 

Second Mortgage On Rental Properties 

Equity mortgages on rental properties are not as usual as the ones on owner occupied homes. However, we have lenders for these types of situations too. 

You should be aware of additional costs and criteria such as Assignment of Rent and lower Loan to Value ratios. Assignment of Rent means that, in case of failure to pay your mortgage, the lender can have the tenant pay the rent directly to them. This is done through the Court.

The lending value is usually lower on rental properties because of added risks to the lender. But, with good covenants, I can still structure your application for best results.

icon depicting second mortgage behind reverse mortgage

  • Homes must be located on land you own rather than in a mobile home park or rented lot
  • House is your primary or secondary residence, not a rental or investment property
  • The structure may need to be immobilized and on a permanent foundation base
  • The unit may need to have been built after a certain year to obtain the financing

Second Mortgage Products BC

  • Low Rate Options Available Based on LTV & OAC
  • Open
  • Re-Advanceable
  • Half Interest
  • Pre-Paid or No payments
  • Interest Only
  • Inter Alia

 

2nd Mortgage For Home Renovations

Second mortgages allow Canadians inside and outside of the Fraser Valley to make the home renovation they’ve been dreaming of. In the past several years, Canadian homeowners have accumulated significant equity in their homes. 

With housing prices increasing, this has become the hottest real estate market in the country since the end of the Second World War. 

Now that the housing market has cooled down, Canadians are using some of the equity they’ve built up to finance significant upgrades to their homes.

According to an Altus Group Housing report, following the Covid-19 pandemic, home renovations witnessed a lower decline than the overall economy.

For 2021, renovation spendings are forecasted to make a comeback and reach $80 billion. Not bad at all if we take into account pre-pandemic numbers: $61,2 billion in 2019 in the 10 major urban centers that were surveyed. Canadians reported that the main reasons they undertook renovations were “to update, add value, or to prepare to sell their home.”

Home renovations only make sense when done to enhance enjoyment or increase your property’s appeal in an emerging buyers’ market. Homeowners who use savings or, worse yet, credit cards to finance major home renovations risk depleting their assets.

 It’s far better to arrange a second mortgage or a line of credit secured against your home’s existing equity when undertaking a major project like this.

Savings or credit card debt can readily finance renovation projects such as bathroom remodelling or painting and wallpapering. For major renovations, it makes more sense to use a second mortgage secured against existing home equity. These mortgages carry lower interest rates than most credit cards.

 

Mortgage For Mobile Or Manufactured Homes In BC

Some lenders offer 2nd mortgages or consolidation loans on manufactured homes or mobile homes. Loans for these types of structures can be hard to find, but we can help you get the best one.

The challenge comes from lending institutions such as banks or credit unions and B-lenders who consider modular or manufactured homes to present greater risks than traditional housing. 

Banks require higher interest rates on second mortgage loans for prefabricated or mobile housing. To secure additional loan products, there may be some requirements that need to be met or restrictions, such as:

  • Homes must be located on land you own rather than in a mobile home park or rented lot
  • House is your primary or secondary residence, not a rental or investment property
  • The structure may need to be immobilized and on a permanent foundation base
  • The unit may need to have been built after a certain year to obtain the financing

Please take this opportunity to go to Equifax and order a copy of your credit.

 

Mortgage Service Areas In British Columbia

Metro Vancouver Lower Mainland

BC Okanagan

Vancouver Island

Columbia Kootenays Of British Columbia