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May 15, 2020 SEP Dev

How to Get a 2nd Mortgage with Bad Credit

If you’re wondering how to get 2nd mortgage with bad credit, then you’ll soon realize that there’s less hurdles with 2nd mortgages compared to 1st mortgages. This is because, unlike 1st mortgages, 2nd mortgages don’t put equal consideration on credit vs income vs equity. In fact, 2nd mortgages relay heavily on the available equity in the home with respect to the 2nd mortgage request.

In order to get a 2nd mortgage with bad credit, we first ask our borrowers to answer the following questions:

  1. What is the balance of your existing 1st mortgage?
  2. What is the loan amount that you are looking to get with the 2nd mortgage?
  3. What is the approximate value of your home, conservatively speaking?

These questions help us determine the “loan-to-value” which is simply a percentage value, calculated by dividing the sum of your total mortgages (including the requested loan), over the value of your home. In current market conditions, most private lenders will consider 2nd mortgages with bad credit to 80%-85% loan-to-value. In most cases, if the LTV does not exceed 80%-85%, then private 2nd mortgage lenders will typically approve the mortgage request, with less emphasis on the other aspects of the application (income, credit, etc.) …

Below is an example of a loan request from a client who is seeking a 2nd mortgage to consolidate some debts. His responses to the 3 questions above were:

  1. Existing mortgage = $232,000
  2. Request = $45,000
  3. Home Value = $375,000

Based on this information, the LTV would be 73.8% and as a result, the request would be approved…

With that being said, it is still important to us that our clients can demonstrate the ability to carry the monthly mortgage payments based on their income sources or by providing an exit strategy for the repayment of the loan at the end of the term. At CMS Canadian mortgage Services, we want to ensure that the solutions we provide are best leveraged for the needs of our clients. We also want to also ensure that these solutions assist (not add) to their respective challenges that they seek to solve…

If you would like to learn more about how to get a 2nd mortgage with bad credit or if you are interested in applying, please feel free to call us today – 905.455.5005