Some say that just one mortgage is stressful enough, but if you look at the possibilities and not the downsides, both your first and second mortgages can be extremely beneficial. We won’t tell you how to get a second mortgage, you can always go here and get it easily. Instead — here’s how you can use your second mortgage in Canada in 2022 in the most beneficial ways, realistically.
What is a Second Mortgage
A second mortgage is like a fixed-term loan in which you borrow more money than you need to buy something. It allows you to have the extra cash flow if you need it and it’s generally easier to pay than a regular mortgage. You can also use your second mortgage funds for other financial goals.
7 Best Ways to Spend Your Second Mortgage
Of course, the list is not limited to just 7 options, and there are no fixed solutions. Every financial situation is unique. However, before you think about a car or a boat (that are, somehow, traditionally listed as the number one way to utilize your second mortgage) — think about these options first.
Consolidate Your Debt
If you have high-interest debt and low-interest debt, consider using a second mortgage to consolidate your debt. With a lower interest rate and fewer payments, you could save thousands in interest over the life of the loan. Plus, it may be more attractive to lenders if you make a one-time payment for your debt rather than trying to repay it over time.
Start a Business
If you have ever wanted to start your own business you could use your second mortgage for the startup capital. It’s a great way to test the waters without putting all of the risks on your personal finances. You can use your second mortgage to cover equipment, training, and other expenses. Just keep in mind that a second mortgage will not earn any money for you, so make sure it is easy to pay off.
Invest in Property
Plenty of people realize the value of the property, and many use cash from their second mortgage to buy the additional property or improve the one they already have. Investing in property doesn’t always mean buying a condo, a second house, or an overseas flat in a country with the best property price predictions. Investing in property may mean something way more simple:
- A renovation in your own house;
- Buying a small extra flat in your own city;
- Purchasing a plot of land that you believe will be in demand soon.
No real estate investor, ever, nor their advisors, will know as much about your area as you do. They may know about the projects, the development plans, the statistics, but they have no idea what life in the community is like.
Build an Emergency Fund
One of the most common uses for a second mortgage is an emergency fund (also known as an emergency savings account). It can be hard to save up for emergencies, but a second mortgage can help you get started. If you don’t want to make large monthly payments, you could always pay off the loan gradually. However, it’s far more likely that you worry about what will happen if one of those emergencies occurs.
For the first few months, you could just pay the minimum payment and make your full second mortgage payment when your first loan is paid off. This would allow you to get a bit ahead before starting to make smaller monthly payments.
Travel the World
On one hand, you may be able to put your second mortgage toward a vacation. On the other hand, you could also use it for additional life experiences or adventures that are not about lying on a beach in a fancy hotel. Traveling the world can bring you new ideas, give you an opportunity to experience other cultures, and maybe — find a new unique perspective on your own life.
Pay for a College Education
If you have children, you’ll want to use your second mortgage to fund the education of some of their children. It might be possible to add it onto their student loan payments or use it to pay for one or more years at an institution. Of course, the actual amount of money that you could use from a second mortgage may be limited by yearly borrowing limits and tax deductions.
Retire On Time
The last and final way to utilize your second mortgage is to retire on time. Unless you have a large trust fund or family inheritance, retirement will probably be expensive. A lot of people can’t afford to retire in their sixties and seventies, so they try to stay working for as long as possible. However, a second mortgage could help you buy time so you can enjoy your golden years without worrying about finances.
A second mortgage is a great way to help you accomplish anything. While there are no absolute guarantees about what you can and cannot do with it, there are also very few things that you absolutely can’t do. Note that your second mortgage will only be beneficial if you understand the potential risks and benefits — so use reliable sources when dealing with second mortgages in Canada.