Second mortgage rates vary across the country. Among the larger cities (Vancouver, Calgary, Toronto, Montreal), you may find that rates and fees are consistent. However, elsewhere in Canada, second mortgage rates tend to fluctuate.
Who are the second lowest mortgage lenders in Canada?
Usually, second mortgage lenders are private lenders. This is because regulated banks fear the risks associated with second mortgages. A second mortgage is a loan that is second on the list of priorities in case of default, which means that if the borrower does not honor his obligations, it is his first mortgage that must be cleared before the second mortgage.
Private lenders are capable of assuming this type of risk, but they play according to their own rules. Private lenders are scattered all over the country and are not huge credit institutions. Click here to find out more about the second mortgage lenders.
The second mortgage lenders are geographically sensitive with their loans. That means they have regional preferences when it comes to tariffs.
Rural Rates vs. City Rates
The second mortgage lenders want to be close to the properties to which they lend. They do not have the national presence of the big banks in Canada; therefore, the rules on rates are somewhat inconsistent. We can easily illustrate this by looking at the differences between the second mortgage rates of cities and those of rural areas.
These lenders are more likely to offer better rates to those living in the city since lenders tend to settle in big cities, a place conducive to business. A borrower who has a property lying far from the second mortgage lender will cause the lender to a headache if the borrower defaults. Those who provide these loans tend to offer them at higher rates than those in cities.
Other Costs associated with Second Mortgages
Many of these lenders will charge fees in advance for a second mortgage. They will usually charge 4% of the value for a second open term mortgage and 3% for a second term mortgage.
Other fees that you will probably have to pay:
– Notary fees
– Legal Fees
– Evaluation costs
– Insurance costs
Lenders will offer at most 70% or 80% of the loan-to-value ratio. If you have a house that is worth $ 200,000 and a first mortgage of $ 100,000, then a lender will only offer $ 60,000 (since $ 100,000 + $ 60,000 = $ 160,000, or 80% of the loan-to-value ratio). However, they will subtract an initial fee of 3% or 4% (depending on the type of mortgage).
The terms of the second mortgage tend to be more succinct; generally, the terms are set at one year, but these can fluctuate from customer to customer.