What you need to get started
You will need money to invest. This can be cash, RRSPs or available funds on a line of credit. Investing from a line of credit registered against your house is tax deductible.
Who applies for a second mortgage?
People applying for second mortgages are those who otherwise don’t qualify for a regular loan. This could be people who have rough credit, newly self employed, people with properties that otherwise don’t fit lending guild lines etc.
Criteria for Approving a second mortgage
We rarely invest loans where the total loan to value is over 80% the total value of the property…an example is Mr. Smith’s property is worth $300,000, his first mortgage is worth $200,000 so his second mortgage can’t be worth more than $40,000 totaling 80% the value of his property. This helps to keep the risk low.
The lender (you) can review the application in full including appraisal, credit bureau, job references etc.
Further we always confirm the first mortgage is in good standing. We always evaluate what the client’s exist plan is…for example, if there are credit issues, we offer credit counseling and an action plan.
What kind of interest can you earn?
We look at the interest rate on a deal by deal basis but generally a second mortgage in today’s market can range from 9% – 19% interest. On top of this you will generally also earn a lenders fee up front for doing the deal.
Costs associated with the loan
The borrower pays for all legal costs to register the loan as well as appraisals etc. You could incur costs if the deal were to go into collection but this is usually something you could revamp from the sale of the property, replacement of the loan etc.
For more information, please contact me.
Marla Daniels, Prolink Mortgage (BC) Inc, 250-733-2201
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