What’s the Process of Buying a Second Property?
Long gone are the days when purchasing a second home was a preserve of the well-to-do. Nowadays, an increasing number of Canadians are opting for a second property to use as a rental, retirement or vacation home. Regardless of whether you wish to buy an apartment in Montreal or a lakeside cabin in Saskatchewan, be aware of the refinancing alternatives and the mortgage approval procedure.
While you mull over whether to purchase another property or not, check out a few private investment companies in Richmond Hill and banks.
If you’ve maintained the equity on your first home, you have a good chance of securing a second loan.
However, do not confuse a second mortgage (sometimes called ‘home equity loan’) with a home equity line of credit or HELOC. A second mortgage is called so because you secure your primary home as collateral while the first mortgage on it is still running.
Many private investment companies in Richmond Hill will offer you a second loan amounting to a maximum of 85% of your home’s value after deducting the first loan’s outstanding.
Before applying for a second mortgage, carefully consider if you’d be able to pay EMIs for both home loans.
HELOC or Home Equity Line of Credit
You can also explore the option of HELOC or ‘Home Equity Line of Credit’. However, you’ll need to have a good credit history and no less than 20% accumulated equity on your existing property to qualify for a HELOC.
With a HELOC, you obtain a maximum 65% of your first home’s value.
A HELOC is a line of credit that functions like a credit card where you pay the interest on the loan amount.
Chances are that you are still paying the EMIs on your first home.
Every EMI you pay to reimburse the primary mortgage adds to your home’s equity. And if you reside in an area where real estate prices have escalated steeply since you bought your home, then it further adds to the property’s equity.
You can capitalize on your property’s cumulative value for a home refinance. When you refinance, you are substituting the first loan with a fresh one. You refinance to make good use of a lower interest rate or to convert from floating rate mortgage to a loan with a fixed rate.
You can use the funds to make a down payment on your second property or even buy it right away.
Contact Banyan Venture Partners
At Banyan Venture Partners, we have helped thousands of home buyers find a second home loan. With a vast network of private investment companies in Richmond Hill, we can help you find the perfect terms to suit your current situation.