When is a Second Mortgage the Right Choice? (Almost Always)

What is a Second Mortgage?

I have heard the term ‘second mortgage’ many times in my life. It never EVER sounded like something I wanted to get involved with. I mean, isn’t ONE mortgage enough? Why go through it a second time, especially concurrently!

Well, a second mortgage doesn’t quite work THAT way. Let me tell you more:

As with many financial ‘products’ (still sounds odd to me to call this stuff ‘products’, hence the air quotes) one of the primary benefits is that you can consolidate other debts under one loan.

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Consolidating Debt, You Say?

Any chance you can get to consolidate your debts is usually a pretty safe bet. Especially if you’re getting a better rate. Get rid of high interest credit, because it can be paralyzing. For personal finances, we need to be fully mobile and educated. Why pay 4 different lenders varying high rates?

Simple. Don’t!

A Second Mortgage is Based on Equity of the First Mortgage

Right… This sounds like Wall Street talk for ‘I’m going to lend you money that I borrowed from you that you paid me back already from the last time I lent you money”.

In a way, the metaphor is on point, however maybe we ought to take the leg breaking goons out of it to make it more appealing.

Let’s say you’ve paid down $50,000 on your first mortgage. A second mortgage will use that $50,000 (or an agreed upon percentage of it) as the basis for a second mortgage. You can borrow $50,000 at a low rate, because it’s secured by the fact that you effectively ‘own’ that portion of the first mortgage.

See, Mr. Wallstreet, take your goons else where!

The Romano Mortgage Group in Hamilton, Ontario is also a great resource for second mortgages.

What I Still Don’t Get… (Add it to the list)

Perhaps it’s because I’ve never yet had a credit problem, but I don’t see the need for a product like this to exist. If you are able to borrow against your home, can’t you just get a normal loan?

The Answer has told to me by Reddit: Not always. If your credit isn’t that great, the only option may be to tap into the equity in your home. In a sense it is acting like a piggy bank for all of those nickles you’ve been paying down over the years. Some of them actually belong to you – Borrow them back!

Southern Ontario Options

The Morgix Mortgage Agency in Toronto, Scarborough and Ottawa has played a great role in helping my understanding of second mortgages AND debt consolidation. Sometimes I call them just to ask questions. They do offer a friendly service that makes them feel quite approachable to ask questions.

When I think about second mortgages, it is Morgix that comes to mind, they are quickly becoming the go-to experts on all things ‘personal finance’.

Morgix inverse logo Scarborough Toronto

See how Morgix can help you with all their financial services.

A Compelling Thought on Personal Finance

The way I see it, there’s some types of debt that probably NEED to exist. A mortgage, for example, is quite necessary. Considering the price of homes, it would be inconceivable to ‘save’ enough money to buy a home, especially in some of the more popular cities, like Toronto, and surrounding ‘burbs like Newmarket and Scarborough… (Prices ARE outrageous right now, eh?!).

When people say lenders and banks are bad, I don’t think they’re being totally practical. Perhaps they’ve been soured by a bad experience, or perhaps they themselves were responsible for some financial trauma, but instead choose to blame the banks and financial institutions.

Sour grapes? Or projection… Either way, a mortgage is a good thing, and is a widely agreed upon means to a very positive end.

OF COURSE someone else is going to catch a few bucks along the way. If not for them, you’d not have the chance to own a home. There’s your deal. Sign, sealed and delivered.

Credit to this Reddit thread, very helpful and brief explanations: POST HERE

Also, an always reliable resource: Wikipedia Second Mortgages

Funny Cartoon


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