This is not a transaction one enters into lightly.
Understanding the Exit strategy is key for the lender as they wish to be paid out in one year typically, two at a maximum. In my opinion your own understanding of the exist strategy is equally vital. What are we going to work together on to get you not just from A to B – but from A to Z.
Like a home equity loan or others of its type, the lender requires it to be secured by a second mortgage lien.
Interest rates are more aggressive due to the lender taking a higher statistical risk with regard to default and also in part due the very long and costly foreclosure process in Canada when default occurs.
Although you can also use a second mortgage for consolidating high-interest credit card debts by reducing your rates and payments and converting compound interest into simple interest, this often creates a recipe for greater disaster as now the credit cards are all cleared for the next round of spending.
Where are rates today on Private money? Also at historic lows.
Average Historical Rates 1976 – 2008 2012-2015
1st Mortgages starting at 10.95% ~5.75%
2nd Mortgages starting at 14.95% ~7.95%
***rates listed above are not quotes, they are subject to change at any time – just a general indication.
There has to be an effective and realistic exit strategy.
Although my job involves restructuring debt I specifically do not want to play a role in creating an inescapable structure.