With all of the interest rate talk these days at the water cooler, it seems that everyone knows where the interest rates are going except for the Federal Reserve. Of course, people are speculating, and if they do predict where the interest rates are headed, they certainly could not tell you what to know about second mortgages in the city of Toronto, let alone when interest rates are rising or dropping. That’s when it makes sense to speak to a second mortgage Toronto Expert about your financial needs.
As most of you have realized by now, the first mortgage rates may not go back down to the 2004 levels when the 30-year fixed was at the low 5’s. Over the last 3 years, most homeowners have refinanced to an interest rate they are very comfortable with.
As the housing market shifts, the demand for money is still great, but people will be taking out second mortgages to get cash and consolidate revolving debt. Second mortgages, also called home equity loans have become popular alternative loans that do not require homeowners to refinance their current home loans. As you can imagine, many homeowners would rather leave their low-interest 1st mortgage untouched and simply take out a second mortgage on the property for incidental cash like making home improvements or financing a second home.
With the market changing, consumers need to understand how home equity loans work. 2nd mortgages are liens that are taken out against your home for purchase, or cash-out refinancing. Second mortgages do use your home’s equity, so you want to be frugal and pragmatic when leveraging your home.
Home Equity loans 125% – These liens are high LTV 2nd mortgages that all you to borrow against your home’s future value. It is hard to believe, but no mortgage insurance is required! The interest rate is fixed and the most common use of funds for these loans is debt consolidation.
Home Equity Line of Credit 100% – Home equity lines are more revolving credit that carries a variable interest rate based on the Fed’s Prime index reported in the Wall Street Journal. You only pay interest when you use funds from the line, and only the interest is due each month during the draw period. The most common use of funds with a HELOC is for financing home improvements.
Which ever second mortgage in Toronto appeals to you, remember to look at the closing costs, interest rate, and whether or not there is a pre-payment penalty. When you are talking with several brokers or lenders the best way to compare the loans is to view the “Good Faith Estimates” which will be provided with the loan disclosures. If you don’t qualify for a 2nd lien, consider an Subprime mortgage loan that offers cash out and refinancing up to 95%, even with bad credit.
Taking out a second mortgage is more advantageous than applying for a home equity line of credit because it is not possible to get variable interest rates when applying for a home equity loan. Because today’s economic and investment conditions are volatile, it would be quite easy to find yourself with rising interest rates and increased loan payments if you take out a home equity line of credit.
The best way to find financing is by taking out a second mortgage because this gives you the option of fixed interest rates. This is a very good safety net and offers you increased protection, especially considering the economic instability that is so prevalent in today’s business world. In this manner, you can avoid financial bankruptcy, or even unease, and have both a good standard of living and enjoy lower interest rates while making payments.