November 6, 2018 Kristen Godel

How do I Get Out of a Second Mortgage?

When most people consider getting a second mortgage, they are usually motivated by a specific need. For example, they may need some money to consolidate their other debts, or they might need some funds to complete a renovation. They might then secure a second mortgage to achieve these goals until they realize that they need to eventually think about how they will consolidate a second mortgage.

As mentioned in our other topics, a second mortgage is different from a typical mortgage in that it is meant to be a short-term loan. These types of mortgages are not meant to be carried over long periods of time as you would a traditional mortgage. This is because second mortgages have higher rates of interest than that of first mortgages and are also typically interest-only solutions.

There are typically only two ways to get out of a second mortgage. The first is to sell your home and in doing so, the second mortgage as well as all other liens against the property will clear themselves. The second is to consolidate a second mortgage by refinancing both mortgages currently held on the property.

In order to consolidate a second mortgage, you would apply for a new loan amount that would include the principal balance of both the existing first mortgage as well as the second mortgage. For example, if your existing 1st mortgage is $200,000 and your existing 2nd is $30,000, then you would request approximately $235,000.00 in order to consolidate a second mortgage. In this example, you’ll notice that there is an additional $5,000.00 in the request. This is due to the fact that there are small (relatively speaking) legal and miscellaneous costs, that are involved in any new mortgage registration and discharge of previously held mortgages. This amount may also change depending on applicable penalties to break/discharge your existing mortgages.

If you are interest in learning more about how to consolidate a second mortgage, or if you have a specific circumstance that you would like to discuss in detail, please feel free to give us a call today – 905.455.5005.