Interested in a Second Mortgage in Ontario?

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If you're a homeowner in Canada and need to borrow a large amount of money—whether it’s to pay off high-interest debt, cover renovations, or help a family member—one option you might hear about is a second mortgage.

Second mortgages can be a smart financial tool when used correctly. That’s why it’s so important to understand how they work, and even more important to work with a knowledgeable mortgage broker who can guide you through the process and help you avoid costly mistakes.

Let’s break it down step-by-step, in plain English.

What Is a Second Mortgage?

A second mortgage is a loan that’s secured against your home—just like your first mortgage. The difference is that it’s in second position on the title of your property. This means:

Your original mortgage stays in place

The second lender registers their loan behind the first mortgage

If you default, the first lender gets paid back first—so the second lender takes on more risk

Because of that risk, second mortgages usually come with higher interest rates and shorter terms than regular mortgages. But they’re also much easier to qualify for if you have home equity—even if your credit score or income isn’t perfect.

Why Do People Get a Second Mortgage?

There are lots of reasons why homeowners take out a second mortgage. Some of the most common include:

Paying off high-interest credit card debt

Financing home renovations

Covering large expenses like tuition, medical bills, or legal fees

Helping kids with a down payment

Investing in a business or second property

A second mortgage lets you access your home equity without refinancing your first mortgage. That’s especially useful if your current mortgage has a great rate or a large penalty to break.

Use a Mortgage Broker to Get a Second Mortgage

Getting a second mortgage isn’t just about finding someone willing to lend you money—it’s about making sure it’s the right solution for your situation.

A knowledgeable mortgage broker will help you determine whether a second mortgage is actually the best option based on your goals, equity, income, and credit. In some cases, refinancing your existing mortgage or exploring other lending strategies might make more sense—and a good broker will guide you toward the path that saves you the most money and reduces your risk.

If a second mortgage is the right fit, the broker will:

Identify the lender that’s most likely to approve your application

Compare different second mortgage products based on rate, fees, and flexibility

Negotiate on your behalf to secure better terms

Ensure you're not overpaying or taking on more risk than necessary

In short, they don’t just get you the loan—they help you make the right decision and protect your long-term financial health.

How Much Can You Borrow with a Second Mortgage?

In Canada, most lenders will let you borrow up to 80% of your home’s appraised value, including both your first and second mortgage.

Let’s say:

Your home is worth $800,000

You still owe $500,000 on your first mortgage

80% of $800,000 = $640,000

So in this case, you could borrow up to $140,000 with a second mortgage ($640K max - $500K existing mortgage = $140K available equity).

Your exact borrowing amount will depend on:

How much equity you have

Your credit score

Your income (or stated income)

Your property type and location

A good mortgage broker can help you calculate your available equity and figure out what second mortgage options you qualify for.

Who Offers Second Mortgages?

This is where things start to really differ from traditional mortgages.

Most major banks don’t offer second mortgages—or if they do, they’re very hard to qualify for. They typically want excellent credit, traditional income, and low existing debt. For many Canadians, that’s not realistic—especially if you’re self-employed or trying to consolidate debt.

This is why most second mortgages in Canada are arranged through:

Alternative or B lenders

Private lenders

These lenders are often more flexible. They focus more on your home equity and property value than on your income or credit score. Some even offer stated income programs, where you verify your ability to repay the loan with bank statements or contracts—not just tax returns.

This is also why working with a mortgage broker is crucial. Most of these lenders aren’t available directly to the public. A broker can match you with the right lender based on your specific situation—and negotiate better rates, terms, and fees.

How Are Second Mortgages Repaid?

Repayment depends on the type of second mortgage you get and who the lender is.

If you get a second mortgage from an institutional lender—like a B lender or credit union—it might be set up like a traditional mortgage. That means:

The loan is amortized over a fixed number of years (like 25 or 30)

You make regular monthly payments that include both principal and interest

Payments are automatically withdrawn from your bank account, just like your first mortgage

If you’re using a HELOC in second position, it works differently:

You’re only required to make the minimum monthly interest payments

You can make extra payments any time, and those go directly toward the principal

This gives you a lot more flexibility if your income or expenses vary from month to month

In many cases, though, second mortgages are used as short-term tools—usually for 1 to 2 years. The goal is to:

Pay off high-interest debt

Improve your credit score

Free up monthly cash flow

Once things are more stable, most borrowers will refinance their entire mortgage, combining both the first and second into one new mortgage at a lower rate with better terms.

Interest Rates for Second Mortgages in Canada

Since second mortgages are riskier for lenders, the rates are higher than your first mortgage.

As of mid-2025:

Private and B lender second mortgages typically range from 7.49% to 12.99%

Your exact rate depends on your credit, income, location, and loan size

If your credit is bruised or you have higher risk factors, expect to pay more

In most cases, you won’t find these rates listed online—because they depend on your full financial profile and property details. That’s another reason a mortgage broker is so helpful: they’ll shop around and find the best rate and terms for your unique situation.

Pros and Cons of Second Mortgages

Second mortgages can be a helpful financial tool, but they’re not for everyone. Let’s look at the upsides and downsides.

Pros:

Access to large sums of money using your home equity

Lower interest rates than unsecured debt (credit cards, personal loans)

Don’t have to break your first mortgage or pay penalties

Flexible repayment options depending on the product

Can help improve cash flow and credit if used to consolidate debt

Cons:

Higher interest rates than first mortgages

Shorter terms (usually 1–2 years)

Risk to your home—if you can’t make the payments, you could face foreclosure

This is why it’s essential to fully understand your terms and exit strategy before signing anything—and where a mortgage broker becomes incredibly valuable.

When Is a Second Mortgage a Smart Move?

Second mortgages are often used to solve short-term problems or take advantage of opportunities that would otherwise be out of reach. Here are a few good use cases:

Debt consolidation: Swapping 20%+ credit card interest for a second mortgage at 9% can dramatically reduce your monthly payments.

Renovations: Using equity to upgrade your home can improve its value and quality of life without refinancing your first mortgage.

Bridge financing: If you’re buying a new home before your old one sells, a second mortgage can help cover the gap.

Living expenses: Many homeowners take out a second mortgage to support their children with school, housing, or starting a business.

Investment opportunities: If you have a plan to earn a return greater than your borrowing cost, a second mortgage can provide the capital you need.

How Do Second Mortgages Work in Canada?

Second mortgages in Canada can be a useful way to tap into your home’s equity when you need it most—without refinancing your existing mortgage. Whether you’re trying to consolidate debt, finance renovations, or deal with a temporary cash crunch, the flexibility of a second mortgage can help you reach your goals faster.

But this type of borrowing comes with higher interest rates, shorter terms, and more risk—so you need to know what you’re doing and plan ahead.

Working with an experienced mortgage broker is the smartest way to go. They’ll make sure the second mortgage fits your financial goals, and they’ll help you build a long-term plan to refinance or pay it off—so it truly works for you.