What do You Need for a Second Mortgage in Toronto?

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<h1>What do You Need for a Second Mortgage in Toronto?</h1><strong> Author: <a href='http://www.articleseen.com/profile_BryanJ.aspx'>BryanJ</a></strong><br /><p>Homeowners in Toronto often find that a second mortgage could be just the answer to help them out whenever they need extra cash for home renovations, buying investment property, paying for medical expenses, or just about anything that requires some extra money. But when a second mortgage seems like it might be the answer, the first question homeowners usually have is they need in order to qualify for a second mortgage in Toronto. For many second mortgages, a high credit score will be needed; this tells the lender how likely you are to pay off the second mortgage. The higher the score, the lower the interest rate will be when you’re getting a second mortgage in Toronto. However, it’s important to note that interest rates on second mortgages are always higher than those paid on a first mortgage. This is because the second mortgage sits behind the first one and that first mortgage needs to be paid off first. Should the homeowner default on the first home loan, the lender has no course of action to take for repayment of the second mortgage. Often, a second mortgage in Toronto will come in the form of a home equity loan or a home equity line of credit (or HELOC,) although these types of loans can also be used as a first mortgage if the homeowner has 100% equity in their home. When home equity loans and HELOCs are in the second mortgage position, the homeowner will need to have a certain amount of equity in their home before being approved to borrow against it. The amount of equity required for the homeowner to hold will vary from lender to lender; but the amount of the loan cannot exceed 80% of the homeowner’s equity. A homeowner’s debt-to-income ratio will also be considered when applying for a second mortgage. This is simply how much debt you have compared to how much income. The lower your debt and the higher your income, the better your interest rate will be on a second mortgage, and the likelier you are to be approved for one. Generally for a second mortgage in Toronto, lenders require that your debt-to-income ratio be 36% with no more than 28% of that debt being used to repay the first mortgage. Some lenders will still provide second mortgages where the homeowner carries a debt-to-income ratio of 37% - 40% and some will allow the ratio to be even higher than that. But it’s important to understand that there are far fewer lenders that offer these types of second mortgages. Second mortgages can be just the answer that’s needed when an opportunity presents itself, or when an emergency arises. But it’s important that homeowners look at not only if they will qualify for a second mortgage, but also if they can truly afford it. The general rule is not to have more debt than you do income. And if taking on a second mortgage still keeps your income level higher, there’s no reason not to take advantage of one! </p><strong>About the Author:</strong><br />Bryan J is the author of this article. For more information about <a rel="nofollow" href=" http://www.canadianmortgagesinc.ca/second_mortgage/">Second mortgage </a> and <a rel="nofollow" href=" http://www.canadianmortgagesinc.ca/toronto.html">Second mortgage in Toronto</a> please visit <a rel="nofollow" href=" http://www.canadianmortgagesinc.ca/">canadianmortgagesinc.ca</a><p> Article Source: <a href='http://www.articleseen.com/Article_What-do-You-Need-for-a-Second-Mortgage-in-Toronto_126391.aspx'> http://www.articleseen.com/Article_What do You Need for a Second Mortgage in Toronto?_126391.aspx</a></p>

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Category : Finance : Mortgage