Sometimes, circumstances arise in life where we need a little extra money in the form of a second mortgage. Increasing home value with a home renovation is a common reason, and sometimes unexpected things like the loss of a job or medical expenses come up. But according to Brian Samuel, a financial expert at Oriana Wealth Management in Vaughan, Ontario, more often than not, the reason people seek out a Toronto second mortgage is to repair “bruised credit.”
Samuel says that when using a Toronto second mortgage to repair credit, it’s important that the homeowner sit down with a professional and prepare a plan for repayment – both on the existing debt they’ll pay off with the second mortgage; and then a repayment plan for paying off the second mortgage after that. Samuel says, “When we have a person in that type of scenario, a second mortgage [can] consolidate or facilitate. We then, almost like a doctor, provide a prescription plan and we teach them how to better their credit so that when the mortgage comes due, [they] can approach the bank they are with. They are able to put their economic life back on track.”
But, along with the plan of how the homeowner is going to repay the debt, it’s also important that they take a close look at whether or not a second mortgage is the answer. While a second home loan can be one of the best ways to pay off debt, sometimes a homeowner simply can’t afford to take on any more debt at all, or the amount they’d get from a second mortgage wouldn’t be enough to cover their existing debt. In cases like these, says Samuel, it’s important for brokers and homeowners to realize that a second mortgage might just not be right for them, and they may want to think about downsizing – by selling their home; buying a smaller, more affordable home; and then paying off the existing debt with the remaining money from the sale.
Samuel says, “We have to act in the best inference of suitability to a client. As an example, if a mortgage is not suitable, we may advise the individual to sell their house because they are not in a good position right now.”
Taking on a Toronto second mortgage can be easy, and it can be a great way to repair ‘bruised credit.’ But they can also be tricky, and may not always have the benefits one thinks it will. Because of that, it’s extremely important that homeowners speak with a professional, experienced mortgage broker who will be able to tell them how much they’ll get from a second mortgage, and how long they’ll have to repay it.
