A second mortgage lets you borrow against the equity in your home without touching your first mortgage. Your current rate and terms stay the same. The second loan sits behind the first one, so it costs more, and it usually runs for 1 to 3 years.
Summary: Homeowners use second mortgages to pay off high-interest debt, renovate, fund a business or handle a big life change. Expect a higher rate than your first mortgage, a short term and a plan to pay it off. A licensed mortgage broker can compare bank, alternative and private options for you across Ontario.
What is a second mortgage?
It is a loan secured by your home when you already have a mortgage on it. The second lender registers its own charge on your title, behind the first lender.
That order matters. If the home is sold, the first lender is paid in full before the second lender gets anything. Because the second lender takes more risk, the rate is higher.
How does it work with my first mortgage?
Your first mortgage does not change. You keep the same rate, amortization and renewal date.
- How much you can borrow: Most lenders let your first and second mortgage add up to 75% to 80% of your home’s value. This is called the combined loan-to-value (CLTV).
- Appraisal: An appraisal is usually needed to confirm what the home is worth.
- Rate: Higher than a first mortgage, but usually lower than credit cards or personal loans.
- Payments: Some are interest-only. Others include principal and interest.
- Term: Often 1 to 3 years.
Why do people take a second mortgage?
- Paying off debt. Roll credit cards, lines of credit, tax owing and personal loans into one payment at a lower rate.
- Renovations. Kitchens, bathrooms, additions or accessibility changes, without draining savings. Some projects also raise the home’s value.
- Business needs. Self-employed owners use equity for cash flow, equipment or growth when a business loan is hard to get.
- Life events. A separation buyout, an estate, school costs, medical bills or anything that needs money fast.
What are my options in Ontario?
Ontario has one of the busiest second mortgage markets in Canada. There are three types of lenders:
- Credit unions and trust companies. Lowest rates, strictest rules on income and credit.
- Alternative lenders. More flexible with income that is harder to prove.
- Private lenders. Focus mostly on your equity and your plan to pay them back. Often interest-only, for 1 to 3 years.
Many people use a private second mortgage as a bridge while they fix their credit, wait for a renewal or get ready to sell.
Mortgage brokers and agents in Ontario are licensed by the Financial Services Regulatory Authority of Ontario (FSRA), which sets rules for disclosure and conduct.
How do I qualify?
Equity matters most. The lender needs enough room behind your first mortgage to feel safe.
Income and credit count too. Banks and credit unions are strict. Alternative and private lenders care more about your equity, the property and your exit plan.
Have these ready:
- Proof of income
- Your latest mortgage statement
- Your property tax bill
- Photo ID
- A short note on what the money is for and how you will pay it back
What does a second mortgage cost?
The rate depends on how much you borrow, your combined loan-to-value, your credit, where the home is and the type of lender.
You may also pay for an appraisal, a lawyer, a lender fee and a broker fee. These can often be added to the loan. Look at the total cost, not just the rate.
More debt on your home is a real risk. Before you sign, know how you will get out of it. Common exits are:
- Refinancing both mortgages into one
- Selling the home
- Paying it down from higher income or other savings
Try our mortgage calculators to see what the payments could look like.
Second mortgage or refinance?
A refinance replaces your first mortgage. If you are partway through a fixed term, that can mean a large penalty.
A second mortgage keeps your first mortgage as it is. It often makes sense when you have a low rate you want to keep and you only need money for a short time.
A refinance can cost less overall when the penalty is small or your term is ending soon. It also works better for large debt payoffs or when you want to reset your amortization.
The way to decide is to compare both side by side: penalty, rate, fees and total cost over time.
Why use a licensed mortgage broker?
Second mortgages have more moving parts than a regular mortgage. A mortgage broker like Kelly Foote works for you, not for one lender. We look at your equity, income and credit, set up the payments and negotiate with bank, alternative and private lenders.
Call 289-723-2126 or book a call to talk about a second mortgage.
Common questions
How much can I borrow with a second mortgage in Canada?
Most lenders let your first and second mortgage together reach 75% to 80% of your home’s appraised value. Private lenders may go a little higher on some files.
Are second mortgage rates higher?
Yes. The second lender is paid after the first lender, so it takes more risk and charges a higher rate. It is usually still lower than credit card or personal loan rates.
How long is a second mortgage term?
Most second mortgages run for 1 to 3 years. Many people refinance into one mortgage or sell before the term ends.
Is a second mortgage better than refinancing?
It can be when you want to keep a low first mortgage rate or avoid a large penalty. A refinance often costs less when the penalty is small or your term is ending.