There are many that believe a private second mortgage is only a form of bad credit mortgage, mostly used as a debt consolidation or home equity loan.
And while this is a very common application for a Toronto private 2nd mortgage, there are other benefits to consider from this source of second mortgage financing.
First, a private mortgage almost by definition, is a form of bridge financing where the term of use is typically no more than a year. If there is a need to get a bridge loan into place faster than what may be possible through a bank or institutional lender, then a private second can be an excellent solution to the borrowers requirements.
Even if time is not an issue, you may not be able to meet all the bank requirements for a bank second mortgage, such as the debt servicing requirements. If the need for cash is truly short term in nature, then it may make more sense to pay the additional costs associated with private money than for go some opportunity or incur greater costs by not having the necessary cash on hand when required.
Second, if your residential home mortgage in first mortgage position is provided by a lender that does not issue second mortgages, it may be far more costly to do a mortgage refinance than just leaving the first mortgage along and acquiring a private second mortgage to provide the additional funds required.
Third, a Toronto private second mortgage would likely only have interest only payments, which on a monthly cash flow basis, may end up being cheaper than a fully amortized mortgage that will require both principal and interest payments.
One of the challenges with private seconds in the market is that there can be a wide range of potential pricing in terms of rates and fees for any given property.
In order to get the best Toronto private second mortgage options available to you at any given point in time, the best approach would be to work with an experienced Toronto mortgage broker who has access to private lending sources that provide second mortgages in the area where you’re property is located.