A second mortgage is a supplementary loan that you take on your property that is already mortgaged. You may need it for different purposes: financing a small business, child’s education or a personal loss. It may not always assure you of best mortgage rates because it is more risky for the lender than the first mortgage. If a homeowner failed to pay the property would be taken into possession and in this case the first lender would always be paid off first. In some case they may not realise the money they gave you. There are quite a few factors that affect the equation. Read on with us to know more about those.

For example, if you have a good credit and more than 20 per cent equity in your home the second mortgages become most affordable. Actually, it works out in the form of a home equity line of credit where you earn best mortgage rates from most of the lenders. But, for a homeowner who has weaker credit and little equity in his/her property it is to be obtained through a trust company or private lender. If we compare the two cases we see that with a credit score of 650 to 900 and say, 25% in equity the interest rate can be 3.5%. But with credit score below 600 and equity less than 10% the rate can go up to 10%.

In order to qualify for a second mortgage you should look into four factors: Equity; Income; Credit Score and property. The more equity you have with you your chances of qualifying for the second mortgage becomes higher. Also, if you pay higher amount as down payment while buying a property, it reduces the second lender’s risk. If you have a dependable and continuous source of income you get the best mortgage rates as it again reduces the second lender’s risk.

Good credit score is important for getting the best mortgage rates in your second mortgage. Property is better and less risky than credit score. So, lenders want to secure their investment and property translates to be the best in this regard. While applying for the second mortgages you must bring your mortgage papers and social insurance number. The lenders also ask for the proof of employment and your most recent bank statements. You must confirm with them on appropriate documentation requirements. You can search online for all the legal requirements. Also, Internet is the best place to compare rates offered by different lenders and their expectations from the borrower.

There are some additional costs of obtaining a second mortgage. You will have to pay closing cost as well for this. It typically runs from 2 to 5% of the value of your additional mortgage. These costs include home appraisal fee; legal fees; title search and title insurance. You should contact your broker if you wish to get the best mortgage rates in your second mortgage, because, they can find out the right lender for you who has a better risk tolerance than the others.
Second mortgage http://bc-mortgage-broker.ca/second-mortgage-financing can be availed at best mortgage rates http://bc-mortgage-broker.ca/tips-best-mortgage-rates from good, reputable brokers.