Second Mortgages
Selectively used and often invaluable.
This can be a hard concept. When we look at a home we tend to view it as a huge ratio or a percentage. What can we accomplish?
Second mortgages can be utilized in making a purchase or refinance work where normally it would not for a variety of reasons. They are a useful and more complex mortgage than a large first mortgage and they can have a very valid tactical reason for being used.
If second mortgages vanished tomorrow we would have a severe problem. They are useful and can serve a purpose. They generally involve fees and are two mortgages, therefore, more complex. The rate of interest on the second is higher but it is usually open. CMHC fees are not incurred and that can offset the rate differential to a great extent.
People who lend on seconds, people who use seconds can both gain. What we try to do is give a blueprint or roadmap for both. It is to everyone's advantage that the second be used tactically with an end point. The client gains and the lender gains. The client gains through getting the financing they need when they need it with the view that they will re-combine the mortgages into a lower product down the road. The lender gains because they know their risk exposure is minimized. From a lenders point of view, seconds can be very risky, especially in a market downturn.
Seconds mortgages are invaluable under certain circumstances, because they are very flexible. We look upon seconds positively when they are used to purchase a home or make a logical refinance. We look upon them more critically when they are used with no end point to resolve, as a default management tool.
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