Third mortgage loans are prioritized lower than your first or second mortgage, meaning that they will be the last to be paid in case of default. More common in the to 70s and 80s, third mortgage loans are now scrutinized more closely by lenders.
It can be difficult to secure a third mortgage, which is why its important to work with knowledgeable and reliable mortgage brokers who can help guide you through the process. Because of their repayment structure, it can be tricky to find a lender willing to provide a third mortgage. This is because a third mortgage will be the last lien paid on the house after the first and second mortgages have been fully paid off. This can mean very little to no money left over to repay the lender of the third mortgage. This means that these lenders have the least security out of the three, making a third mortgage almost as risky as an unsecured loan.
Qualifying for a third mortgage varies widely between lenders. Some conditions that lenders will focus on can include credit scores, your income, and your other mortgages. Like all loans, a third mortgage is based on collateral, which in this case is the value of your real estate. The more value your property has, the better the chances that you will be approved for a loan.
Like a second mortgage, third mortgages can be used to pay for home improvements, thereby improving or enhancing the value of the home. When considering a third mortgage loan, it’s imperative that you consider the total amount of your regular payments on all your mortgages currently in place to decide whether or not a third is feasible. Monthly payments will be required on all three mortgages simultaneously, and if your third mortgage were approved, it would be done so at a much higher rate of interest than the first two.
To figure out whether a third mortgage is right for you, we encourage you to speak to one of our mortgage brokers at Group Mortgage Solutions. We can help you better understand the implications and risks associated with a third mortgage and what the best financial fit will be for you.