If you're not first, you're second.

What are second mortgage?
A second mortgage is a subsequent mortgage secured against a property that is already mortgaged. The new mortgage gets registered behind the existing mortgage. Second mortgages are considered higher risk and always come with a higher interest rate. This is because, if an owner defaults on their mortgage and the lender takes possession of your home, the first mortgage would get priority to be paid and if there is money remaining, the second mortgage gets paid out. Second mortgages run the risk of not being paid out fully. To compensate for that higher risk, they come with a higher interest rate.

When does it make sense to get a second mortgage?

Even with higher interest rates than first mortgages, second mortgages can be a great way for homeowners to consolidate debt because the interest rate on a second mortgage will still be lower than interest rates on credit cards, car payments or unsecured lines of credit. If a homeowners first mortgage has a low interest rate, it might not make sense to break that contract to refinance. Contact your mortgage broker to help you run the numbers!

How do you qualify for a second mortgage?
Qualifying for a second mortgage is much like qualifying for your first mortgage. The lender will look at, income, credit score, property and in addition, how much equity you have in your home. The more equity you have in your home, the more likely you will be to qualify for a second mortgage. The lender may require an appraisal to determine the value of your home and the amount of equity you currently have.

There are pros and cons to getting a second mortgage. Speak with your mortgage broker to find out if this is a good option for you.