With a second mortgage, you can leverage your home’s equity and access it to help pay for anything worthwhile but which you’re currently unable to pay for, such as a new car, your children’s education, home renovations or fixing your credit. A mortgage is a significant chunk of money every month, and even with the very best of intentions, it can be hard to meet the financial commitment of mortgage payments every month without fail. When you struggle to pay your mortgage, other areas of your life suffer as a result, and your credit can quickly spiral out of control.

Many Canadian homeowners with bad credit are comfortable tapping into their home’s equity to get them back on track with their finances, and fix their credit.

Read on to know more about second mortgages and whether they could help you fix your credit:

How does a second mortgage work?

Similar to your first mortgage, a second mortgage is an extra loan that uses your home as collateral. As your equity builds, the amount of money available for a second mortgage increases, too, and the majority of lenders permit homeowners to borrow up to 80% of their equity.

With a second mortgage, you’ll get a lump sum of money from your equity that must be paid alongside your first mortgage, but as payments on a second mortgage are only paid on the interest, your monthly payments will be lower.

Could a second mortgage help you fix your credit?

It’s not unusual for Canadian homeowners to struggle with debt, but with a second mortgage on your existing home and consolidating your debt, you can settle all of your outstanding bills, and then set up affordable payments every month.

By reducing your debt payments, you can reduce your stress levels and help repair your bad credit, and if you think this might be an option for you, it’s best to talk it over in detail with a local mortgage broker.

Will you be approved for a second mortgage with bad credit?

If you’ve got a high loan-to-value ratio, lenders will invariably see you as a significant risk, and many may not even consider you for approval, especially banks. That said, with the help of a mortgage broker, you should be able to find at least one lender to approve you for a second mortgage, and help you fix your credit.

Finding alternative lenders willing to help you as a Canadian homeowner wanting to secure a second mortgage, may seem like an impossible task, but with an experienced mortgage broker in your corner, it becomes much easier.