Understanding The Differences Between Refinancing And A Second Mortgage

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Understanding The Differences Between Refinancing And A Second Mortgage

Are you thinking about accessing your home’s equity? You have two options for you to go about doing so, including refinancing your mortgage or taking out a second mortgage in Toronto. The two require different criteria and varying reasons for choosing between them, which should prompt you to make a decision which method is most suitable for you. To determine which option is the most practical for your situation, Lez Gomez the Best Mortgage Agent in Toronto has a guide for you comprised of what second mortgages in Toronto and refinancing in Toronto are and highlighting the difference between the two. 

Here’s everything you need to know before deciding between refinancing your mortgage or getting a second Mortgage:

Refinancing: 

Mortgage refinancing is the process where homeowners can pay off their existing mortgage and any outstanding claims against the property and then set up a new mortgage. Change can be applied to the term, rate, the amount borrowed, length; or a combination of two or many more. The homeowner in the case of cash-out refinancing has decided to increase their amount borrowed. Cash-out refinancing involves the homeowner using the value of their property to take out a new mortgage that is more than the sum of the existing mortgage they have. Therefore, the homeowner will pay off their current mortgage and acquire the balance in a lump-sum payment during closing. Lez Gomez Mortgage Broker in Toronto can help you with this decision as it is complicated, especially with the recent developments that have affected world markets, and mortgage shoppers can expect a more difficult time in applying for mortgage refinancing in the upcoming months.

The Benefits of Refinancing:

  • You may use the value of your home to take out funds for any purpose you choose.
  • You can choose to write off the initial cost of the mortgage over a long duration of time to keep low payments and repay your loan gradually.
  • You only carry one mortgage and may be able to achieve an appealing interest rate.
  • Take advantage of historically Low rates.
  • Potentially pay off high interest debt.

Second Mortgage: 

A second mortgage is when an additional loan, with a different mortgage lender, is taken on a property that is already mortgaged. When the mortgage holder makes payments on the second mortgage, they must also continue to make payments on the primary mortgage. So, how does a second mortgage work? The amount you can borrow will depend on the equity you have in your home. For example, let’s say your home is valued at $400,000 and the balance of your first mortgage is $100,000. The total of a first and second mortgage can be as much as 80% of your home’s value, so your second mortgage could be as much as $220,000.

The benefit of a second mortgage/home equity loan includes the following:

  • No regular monthly payments required
  • You don’t have to prove income to qualify
  • No repayment required for the term of the second mortgage – Conditions apply
  • Tax benefit 
  • Renewal terms can match your first mortgage
  • Not required to break the contract term on your first mortgage i.e. NO penalties incurred.
  • Quick and fast access to cash without the “red tape”.

Whether you’re looking to refinance your mortgage or opt for a second mortgage in Toronto. Lez Gomez and his team of mortgage brokers in Toronto have been helping home buyers get fast mortgage approvals. Call us today and experience the difference of superb customer satisfaction and quality of service.

We have been proudly serving the community for the past 20 years. We have been offering excellent mortgage products for Toronto homeowners. If you are looking for a new mortgage solution tailored to your needs, call us today.

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