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  • Writer's pictureRIHANA PEIMAN

Pros and cons of the 2nd Mortgage



  • clear debts that have high interest rates attached;

  • secure capital to help their family or business;

  • finance major renovations to their home;

  • make consistent monthly repayments that could be set up on the same schedule as their first mortgage; 

  • most of private lenders offer Interest Only payment.


BUT

  • due to a greater risk for the lender by being in the second security positionan,  equity take out loan in the form of a second from a private lender will likely be at a higher interest rate for a lower loan amount vs. a first mortgage with a traditional lender.

  • the borrower needs to consider additional expenses, such as closing costs and appraisal fees, which may need to be paid upfront.

  • exit strategy that the borrower needs to come up with as a short mortgage solution.

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