Have you ever thought about doing a mortgage refinance only to find out the process was just too daunting to complete? How many times have you heard that collateral mortgages are a bad idea? – and yes, on occasion you have likely heard this comment even from me!
Well I must confess; collateral mortgages are not all bad. There is at least one circumstance in which having a collateral mortgage can be fantastic.
Let me explain…
If you are purchasing a home, perhaps one you plan to stay in for a long time, with the intention of renovating or upgrading eventually to accommodate the needs of a growing family, then there is a huge benefit to having a collateral mortgage put in place at the time of purchase.
Why? Typically, a collateral mortgage can be placed on your home using a value of up to 125% of the appraised value of your home. This means that what you owe is always less than the amount of ‘collateral’ attached to your home. And because of this, it makes it so much easier for your mortgage lender to do a refinance for you at a higher mortgage amount – without legal fees – when the time comes that you need to access funds from your equity. And who doesn’t like the thought of saving on legal fees at the time of a mortgage refinance?
So if you are thinking of buying your forever home, and have visions of renovations or taking equity out of your home in the next few years, consider a collateral mortgage – it can save you money!
And yes, a collateral mortgage works for refinances and renewals too.
Want to know more about collateral mortgages? Connect with me and I’ll explain exactly how this process works. Together we will figure out if a collateral mortgage is right for your family.