If you’re looking to renovate your home or to have some extra funds on hand to pay for a child’s education, but already have a first and second mortgage on your property, there is hope. Although, they are hard to come by, third mortgages are available to help you out financially.
What is a third mortgage?
A third mortgage is a mortgage loan in which the amount of money lent is based on the value of the property. This will be the third in a series of mortgages, so it is subordinate to the other mortgages you have. That doesn’t mean you can pay it off whenever. It simply means that the first and second mortgages will be paid off first. You will still be making monthly payments on your first and second mortgages but now you will also be making payments to a third.
What are the pros of a third mortgage?
Most mortgages are beneficial to the borrower because you will be receiving a loan to put towards buying a property or making improvements to it. Third mortgages are useful because they allow you to enhance your home or life by giving you supplementary funds to apply as you see fit. For instance the extra funds from a third mortgage can be used for renovations, sending a family member to school, vacations and more. Plus, the more valuable your property, the bigger the amount of you’ll be able to secure from your third mortgage (often up to 85% of your home’s value).
What are the cons of a third mortgage?
Unfortunately, with a third mortgage, it’s important to be aware of some of the cons. As with any mortgage, there is interest because no loan exists without it. Another problem with a third mortgage is that they are considered risky and not many lenders provide them. Acquiring a third mortgage from a traditional lender can be tricky and you may have to resort to a private lender. Third mortgages provide a lender with the least amount of security therefore, the rates can be incredibly high. Moreover, you will still required to make payments on your first two mortgages on top of your third one. Plus, if you default on any of your mortgage payments your home could go into foreclosure. If your home does go into foreclosure, the first mortgage is given priority over the second and third ones.
How do you know if a third mortgage is right for you?
Everyone’s financial situation is different, so for some people, third mortgages make sense. For others, it may not be wise. Before considering a third mortgage, meet with a mortgage broker. They will be able to lay out the details and help you see if a third mortgage is the right option for you. They will also be able to find a lender that provides third mortgages as these lenders are few and far between.Back
Your home is your most valuable asset. It is probably the single largest investment you will make in your lifetime. Your home is more than a place to rest your head and raise a family. Your home contains equity. It is a treasured resource and in some cases, can even be used as an ATM (aka cash back mortgages and HELOCs – don’t worry we’ll get there).
Everyone who is looking to purchase a home will need a mortgage. But, what is a mortgage exactly and why do you need it? Besides being the term to describe a loan secured by real estate, a mortgage allows you to access funding to procure your dream home.
There is a massive difference between mortgages and home equity loans. Read More
The Bank of Canada had hiked the interest rates on three separate occasions over the past eight months. Read More
Many first time home buyers have heard the term “mortgage insurance” but may not understand what it is and why it’s necessary to have. Read More
For new homeowners, or for those looking to renew a lease, rising interest rates will have an effect on your finances. Read More