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Tuesday, June 21st, 2022

Second Mortgage

In some circumstances, a second mortgage may be required by a borrower. This type of mortgage ranks behind your current first mortgage in priority of payments.  This means that if the mortgage was to go into default and the lender foreclosed, the first mortgage holder would get paid ahead of the second mortgage holder.

The second mortgage holder takes a much higher risk compared to the first mortgage holder and for this reason, the interest rate on a second mortgage is significantly higher than traditional mortgages.  In addition, a mortgage brokerage fee is generally involved in the transaction. As a general rule, second mortgages are not amortized, i.e. they require interest-only payments which can also benefit the borrower’s cash-flow.  We can assist borrowers who have a need for such financing.

Second mortgages generally have a term 12 months and on maturity of the term, we would ideally want to roll this mortgage into the borrower’s first mortgage, thus saving them money.  Second mortgages are generally used as a band-aid solution to a client’s specific situation at a particular point in time.