Brampton Mortgage Broker – Rumy Gill

Commercial & Residential Mortgages. “Ready To Fund!”

Brampton Mortgage Broker - Rumy Gill

In recent years, home values in Brampton and the GTA have been going up significantly and has allowed homeowners see the equity in their home build up. Now, with home prices reaching levels never before seen, this maybe a great time for you to extract the cash from your home that was built up from your home. One great way to get access to your home’s equity is through the financing of a second mortgage. A second mortgage can be a powerful financial tool and can benefit you in a number of ways, but first you have to understand exactly what it is and how it can be used.

Luckily for you, our team at Brampton Mortgage Broker has put this short but informative article piece to give you overview of what is a second mortgage, and how you can use it. Now, without any further a do, let’s dive into informative article piece.

What is a second mortgage?

Simply put, a second mortgage is a secured loan against your home’s equity that is taken out behind your current mortgage. Equity is referred to the value of your home minus how much you still owe on your mortgage. You gain equity in two ways: by paying down your mortgage, and as your home increases in value.

In most cases, you will be able to get a second mortgage up to 85% of your home value. It is important to note that you don’t need to break your existing mortgage for you to obtain a second mortgage.

So, to understand how this works, we will use an example to give you a better understanding.

Brampton Home Value $1,000,000 ($1 Million)
Current First Mortgage $400,000

Maximum Second Mortgage that can be obtained 85% of your Homes Value minus the Current Mortgage you hold.

$1,000,00 * 0.85 -$400,000 = $450,000

So based on the above scenario you will be able to get a maximum second mortgage with most lender for up to $450,000. But of course, you may take a lower amount than 85% of your homes value if you don’t require that full amount of money. So, if you need only $100,000 for example, then based on the above scenario, then you will be able to obtain that amount because you will be borrowing well below 85% of your homes value.

In terms of repayment, a second mortgage works similarly to your first mortgage. You make regular monthly or bi-weekly payments for a set term at a predetermined interest rate. At the end of your term, you’ve got the option to either pay off the loan in full or renew it for another term.

How can I use a second mortgage?

The money that you get from a second mortgage may be used in any way that you decide, but since you are borrowing against your home it is ill-advised to use it just to blow it all on a spending spree and rack up even more debt. However, below are three common reasons why most of our clients have obtain a second mortgage with our help over the years:

Consolidating debt:

Second mortgages do have slightly higher interest rates than first mortgages, but the interest rates still are usually much lower than other types of loans such as credit cards, payday loans, or even car loans. This fact makes second mortgages a great tool for consolidating debt. If you find that you’ve gotten in over your head with high-interest consumer debt, a second mortgage can help you lower the amount of interest that you are paying so that you can pay down your principal more quickly.

Home renovations:

Making the right upgrades to your home can increase its value meaning that home renovations are an investment that you can see a return on when its time to sell. Other renovations, such as major repairs may be necessary to prevent further damage that could possibly devalue your home. Using a second mortgage for such renovations and repairs makes sense because of the high amount of money usually needed combined with the low interest rate of this type of loan.


Of course, there are other types of investments that you might require cash for as well. If you are starting a business for example, a second mortgage is usually much easier to qualify for than a business loan. Or if you wish to purchase a rental property and need money for a down payment, using a second mortgage can be a great solution.

Contact our team at Brampton Mortgage Broker today!

A second mortgage can be a great option if you are looking for a large and low interest loan. To learn more and see if this is the right solution for you, contact me today.