Second Mortgage Ontario.

Second Mortgage Ontario.

As a direct private mortgage lender and also an expert in sourcing external private financing, we assure you that you might have options you didn’t know existed. Often times we are approached by clients who have been turned down for financing by their very own bank. That’s right, the bank that has housed their personal banking, investments, and potentially business banking. It’s a sour feeling, but we assure you that it isn’t personal. Federally regulated lenders have been prescribed rigid underwriting guidelines that must be complied with.

Naturally, this leaves a massive void in the mortgage market. If you are new to Canada, self-employed, or have less than perfect credit, you might experience issues with obtaining a bank approval. We work with alternative bank lenders as well, so in the event it’s a matter of a slight stretch away from prime financing, we will help. Alternative lenders have much more lenient credit and debt servicing ratio requirements. In addition, we have programs specifically designed for you if you are self-employed. At DV Capital Corporation, we provide our clients with fast and flexible mortgage solutions.  

For the most part, private mortgages are usually set up on an interest-only basis. This means that your payment consists of strictly interest payments, without any amortization. Although most second mortgages are interest-only, we can amortize your second mortgage up to 40 years.

To further accommodate our clients we might be able to prepay the mortgage payments for the term. In construction financing, this is referred to an interest reserve. In addition to prepaying the mortgage for the term, we can also fix a monthly payment that works best for you, and just prepay the difference of the actual payment using the mortgage proceeds. 

Example

Second Mortgage Ontario Example – Prepaid Mortgage Option:   
Loan Amount: $50,000
Interest Rate: 8.99%
Months in Term: 12
Monthly Payment: $374.58
Annual Interest: $4,995.00 *to be deducted from the loan amount*
Gross Net Advance: $45,005
Monthly Mortgage Payment: $0.00

Second Mortgage Ontario Example – Fixed Monthly Payment Option:
Loan Amount: $50,000
Interest Rate: 8.99%
Months in Term: 12
Monthly Payment: $374.58
Monthly Payment Preference: $200.00 
Monthly Payment Difference: $174.58
Difference over 12 Months: $2,095 *to be deducted from the loan amount*
Gross Net Advance: $47,905
Fixed Monthly Payment: $200.00

You will keep in mind that other transactional costs including arrangement and legal costs will be deducted from the gross loan amount. Furthermore, keep in mind that should you wish to extend your mortgage after the 1-year term, your payment reverts to the actual payment. To put this into perspective using the above example, your monthly mortgage payment will divert back to the $374.58.  

Reasons for a Second Mortgage

• Consolidate high-interest debt into a manageable payment at a low rate. 
• To bring your existing first mortgage up to date and cure the mortgage arrears. 
• A cost-friendlier way to borrow funds without incurring a pre-payment penalty from breaking an existing mortgage.
• Construction financing. 
• Renovate your basement and bring in a tenant for rental income. 
• Discharge your bankruptcy or consumer proposal. 
• Deposit for the purchase of a pre-construction or resale property. 
• Funds to file your personal or corporate income taxes and also to address CRA arrears. 
• Investment purposes.
• Business operating capital.

In most cases, second mortgages are usually written for a 1 year term, although shorter and longer terms are available. Second mortgages are generally a shot-term facility that is used as a band-aid. You can benefit from receiving a fast and flexible second mortgage approval to use the funds are you see fit. Keep in mind that the ultimate goal is to convert the private mortgage into a traditional mortgage when your income and credit profile conforms to institutional guidelines.

If you would like to learn more about DV Capital Corporation and a second mortgage in Ontario, contact us anytime.