Second Mortgage Loans in Canada – How I Qualified and Saved My Credit

admin — Sat, 05 Dec 2009 19:10:32 +0000

The use of second mortgages by clients is more common then one would think. The common issue amongst my clients is what would the lender think and how would I qualify.

Income qualification is secondary to the LTV (Loan to Value) calculation on the property. The impact of the LTV is discussed in a future article (Second Mortgage Loan in BC with Bad Credit | LTV What the Heck is It?)

Where the income qualification comes in, is where the private lender determines if the client can survive and fund the balance of the 1st mortgage and the 2nd mortgage. Lenders in this category are not looking for trouble or foreclosures. They want to know that the clients can move forward and complete their obligation.

The income requirements can vary between the private lenders issuing second mortgages in BC.

Some private lenders have minimal requirements others look for complete confirmation of all income sources. The level of detail is usually tied to the rate. A lender of second mortgages who only considers LTV will usually have a higher tolerance for risk in the second mortgages they issue in BC. The rate will usually reflect the level of perceived risk.

Here is the interesting part, private lenders are intent on ensuring that the debt is paid. As I tell my clients…”The money people want their money” Not excuses, not we had a run of bad luck; sorry social services is down the hall.

The determination of income levels and personal budgets is an exercise that the borrowers should go through. No one wants to lose their house but that is precisely what will happen if you default on your second mortgage.

Prepare an analysis of what you make and how much you spend. Determine if you can make the mortgage payment, it may that the mortgage payment is less then your total payments today. However in some cases, such as when the tax man is knocking on your door with a lien, it is worthwhile considering the higher interest, fees and payments to ensure that your house remains your house.

Only .49% of mortgages in Canada are in default at any one time. The impact of a foreclosure will have a disastrous impact on your credit rating. Revising your lifestyle in line with your income may save your house and your credit rating.

Run the numbers, ensure that your income is sufficient to make the payments on the second mortgage. And on a final note, you may lie to your Momma; lie to the taxman but don’t lie to your mortgage broker when you are figuring out how to refinance your debt.

By: Duncan Seward

Mortgage second » Income Qualification

Second Mortgage Loans in Canada – How I Qualified and Saved My Credit