For many people, money is tight and most of us live on monthly budgets. We need extra money for a variety of reasons. Sometimes, it is necessary to take out a personal loan with your bank or credit union, such as for buying a new or second car for your family.
For some other specific and very practical financial reasons, it might be a good idea to consider taking out a second mortgage on your home instead. If you’ve lived in your home for a few years, you have built up equity in the home. You’ve done this through a combination of the original down payment, paying down the principal of the first mortgage and through property value appreciation. The equity on your home gives the ability to borrow money in the form of a second mortgage.
The reason to get a second mortgage should be well thought and researched before you start the process. When getting a second mortgage, you must always keep in mind that a second mortgage is a secured loan. The security or collateral you are using is your house. If you default on your second mortgage, you could lose your home through foreclosure. It is vital you are feel financially comfortable and are able to take on the extra debt load.
What can a Second Mortgage be used for?
The main reasons most people get a second mortgage include;
• Making Home Renovation Improvements – Home renovations are an excellent reason to apply for a second mortgage for your Calgary home. The projects are generally of a relatively significant scope and as such, tend to be somewhat pricey. The project could be a major re-modelling of your kitchen, adding on another room or several rooms to add square footage to your property, adding in another bathroom, or tearing down a single car garage to make it a two car garage. It could also be a combination of several projects. The end result may not only adds more square footage to your home but will add to both the current value and make the home more attractive for re-sale.
• Children’s Education – College and tuition fees have risen dramatically over the years. Although you might have tried and saved for children’s college funds when they were younger, you might find that that time has passed by more quickly than you were prepared for, and are not ready to help them financially as well as you intended. Parents want the best for their children and although they can avail themselves to student loan, we would all prefer they not no start their independent new lives and careers in debt.
• Buying a Second Home – Real estate is generally a good investment. Your preference for investments might center on real estate. When interest rates are low and the timing is right, you might see it as a good opportunity to buy another home in Calgary to earn some rental income and build equity in your second home for re-sale down the road. A second home could be used as a wedding gift for one of your children about to be married as well. Alternatively, you might be looking to escape the hectic lifestyle of your urban environment and dream of that country cottage where you can kick back and relax on the weekends or your hard earned holidays.
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