If you are asking what is a second mortgage in Canada, the short answer is this: it is a loan secured against your home while you still have a first mortgage in place. It lets you borrow against the equity you have built up, without disturbing your existing mortgage. Below we break down how it works, what it costs, and how to decide if it is right for you. At Turnedaway.ca we arrange second mortgages for Ontario homeowners the banks decline.
What Is a Second Mortgage in Canada?
A second mortgage in Canada is a loan secured by your property when you already have a primary mortgage. It is called “second” because it is subordinate to the first, meaning the first mortgage lender is paid before the second if there is ever a default. A second mortgage can take the form of a home equity loan paid as a lump sum, or a home equity line of credit (HELOC). Rates are higher than a first mortgage because the lender takes on more risk sitting behind it.
How Does a Second Mortgage Work?
You may not be able to get a second mortgage through your bank, since the big banks apply strict approval criteria. Mortgage brokers who specialize in secondary financing can arrange both institutional and private second mortgages, with far more flexibility. Because the loan is secured by your home, rates stay competitive and terms are flexible.
Compared to your first mortgage, a second mortgage is often easier and faster to arrange, with approvals frequently within 24 to 48 hours, and income or credit challenges do not automatically disqualify you. You can generally borrow up to 80% of your home’s value, combining your first mortgage and the second together. Your equity grows as you pay the loans down.
Types of Second Mortgages
| Criteria | HELOC | Home Equity Loan | Private Mortgage |
| Type of loan | Revolving | Fixed | Fixed |
| Funds delivered | Draw as needed | Lump sum | Lump sum |
| Credit matters? | Yes, good credit usually needed | Equity-based, credit flexible | Equity-based, no minimum |
| Maximum loan-to-value | Up to 80% | Up to 80% | Up to 80% |
| Lenders | Banks, credit unions, B-lenders | Credit unions, B-lenders, private lenders | Private lenders |
Terms and availability vary by lender and your situation, so it helps to review your options with a broker before deciding.
Fees and Interest Rates on Second Mortgages
A second mortgage carries a higher rate than a first because the second lender takes on more risk: if a homeowner defaults, the first mortgage is repaid before the second, and the second lender only recovers if there is enough equity to cover both. Costs can include a lender fee, broker fee, legal fees, and an appraisal, and these are disclosed in writing before you commit. Rates are still well below unsecured credit like credit cards.
How to Qualify for a Second Mortgage
With an equity-based lender, approval rests mainly on your property, not your credit score. Lenders look at:
- Equity: Details of your first mortgage confirm how much equity is available. This is usually the deciding factor.
- Property value: An appraisal establishes your home’s current value.
- Income: Proof of steady income helps, but is not required.
- Credit: A stronger score can improve your rate, but credit is rarely the deciding factor.
Is a Second Mortgage a Good Idea?
A second mortgage is beneficial when you use the funds for the right reasons. Common, sensible uses include:
- Debt consolidation: Pay off high-interest balances like credit cards. See debt consolidation.
- Clearing arrears: Catch up on mortgage arrears, property tax arrears, or CRA debt.
- Stopping a power of sale: Bring your mortgage current and stop a power of sale.
- Home renovations: Upgrades that add value, especially before a sale.
Working with a broker helps you use the funds well and choose the right structure.
Alternatives to a Second Mortgage
If you need extra funds, it is worth weighing other options too. A refinance replaces your first mortgage entirely, which can make sense if your current rate is high anyway. A HELOC gives ongoing access rather than a lump sum. For smaller, short-term needs, an unsecured personal loan may be cheaper than registering a second mortgage. The right choice depends on how much you need and how you plan to use it.
Explore Second Mortgages in Ontario Today
With a clear understanding of what a second mortgage is, you can decide whether it suits your needs. If you are unsure, call us toll-free at 1-855-668-3074 for a free consultation, or apply online today.
Frequently Asked Questions
What is a second mortgage in Canada?
A second mortgage in Canada is a loan secured against your home while you still have a first mortgage in place. It sits behind the first mortgage on title and lets you borrow against your equity, as either a lump sum or a line of credit.
How much can I borrow with a second mortgage?
Approval typically stays within 80% of your home’s value, combining your first mortgage and the new second mortgage. The more equity you have above that, the more you can access.
What are the drawbacks of a second mortgage?
A second mortgage has a higher rate than your first mortgage and adds a second payment, and there can be lender, broker, legal, and appraisal fees. Every cost is disclosed in writing before you commit.
What happens if I default on a second mortgage?
If a default is not resolved, the first mortgage is repaid before the second from any sale proceeds. The second lender only recovers if there is enough equity to cover both, which is why keeping an equity cushion matters.
