Looking for Second Mortgage Options in Ontario?

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If you’re a homeowner in Ontario thinking about upgrading your living space, you might be wondering how to pay for it. Renovations like a new kitchen, bathroom upgrade, or finished basement can dramatically improve your home’s comfort and value—but they also come with a big price tag. One option more homeowners are turning to is using the equity in their home through a second mortgage.

Pros & Cons of a Second Mortgage for Renovations

A second mortgage allows you to borrow against the value of your home while keeping your original mortgage intact. The new loan is secured by the equity you’ve built up, and you receive a lump sum of money to fund your renovation project.

The Pros:

Lower interest rates: The rates are usually lower than credit cards or personal loans because the loan is backed by your property.

Larger loan amounts: Because your home secures the loan, you can often borrow a significant amount compared to unsecured loans.

Fixed payments: Many second mortgages have fixed rates and set monthly payments, making budgeting easier.

More control: You can use the money for any type of renovation or improvement.

The Cons:

Higher rates than first mortgages: Second mortgages generally have slightly higher rates than first mortgages, since lenders take on more risk.

Closing costs and fees: Expect legal fees, appraisal costs, and sometimes lender fees.

A second mortgage can be a smart way to finance home improvements if you’re confident in your budget and have enough equity built up.

Second Mortgage Interest Rates in Ontario

As of May 2025, second mortgage and HELOC rates in Ontario typically start around 6.99% and 7.49% and can vary based on your credit score, income, property type, and loan-to-value ratio.

Compared to first mortgages, these rates are higher because second mortgages are riskier for lenders. They get paid only after your primary mortgage is paid off if something goes wrong. Rates with traditional banks may be slightly lower, but they are also much harder to qualify for if your credit or income isn’t perfect.

What affects your second mortgage rate?

Credit score: Higher scores get better rates.

Equity amount: The more equity you have, the safer the lender feels.

Location and type of home: Urban, detached homes usually get more favourable rates than rural or unique properties.

Lender type: Banks offer lower rates but have stricter requirements. Private lenders are more flexible but charge more.

It’s important to work with a qualified mortgage broker to shop around and negotiate the best rate possible for your situation.

How to Get a Second Mortgage for Renovations

The smartest first step when thinking about a second mortgage for renovations is to talk to an experienced and reputable mortgage broker. Brokers work with a wide network of lenders and can help you find the right loan at the best possible rate for your situation. They also simplify the process by handling the paperwork and negotiations for you.

Here’s how the process works when you partner with a mortgage broker:

1. Consultation with Your Broker

You’ll start by meeting with your broker to discuss your renovation goals, how much you want to borrow, and your current financial situation. Your broker will explain your options and what lenders are likely to approve.

2. Assess Your Home Equity

Your broker will help you determine how much equity you have available. In Ontario, most private lenders allow homeowners to borrow up to 80% of their home’s value (less any existing mortgage balance).

3. Gather and Review Your Documents

Your broker will guide you through preparing the documents lenders need to review:

Recent mortgage statements

Proof of income (such as pay stubs and tax returns)

A property tax bill

Your broker may also arrange for a current property appraisal if required

4. Submit Your Application

Once all the documents are ready, your broker will submit your application to carefully selected lenders. Brokers know which lenders are best suited for renovation loans and which ones are most likely to approve your application quickly.

5. Review Offers

Your broker will present the offers you receive, explain the interest rates, fees, repayment terms, and any lender conditions. They’ll also help you compare the options and choose the one that best fits your needs.

6. Finalize the Loan

Once you’ve chosen a lender, your broker coordinates the legal and administrative process. After everything is signed, the funds will be released—usually to your lawyer’s trust account first, then transferred to you.

Working with a broker saves you time, minimizes stress, and often results in better rates and terms than approaching lenders on your own. A good broker acts as your advocate throughout the entire process and ensures your second mortgage is set up smoothly so you can move forward with your home renovations.

Which Home Improvements Add the Most Value?

If you’re borrowing against your home, you want to make sure your renovations actually increase its market value. Not every project will give you the same return. Here’s where you’re likely to see the biggest payback:

Kitchen remodels: The kitchen is considered the heart of the home and often delivers the best return on investment. Even a modest upgrade can boost resale value.

Bathroom renovations: Updating outdated bathrooms with new fixtures, tiles, and lighting is always a good investment.

Basement finishing: Turning an unfinished basement into livable space, like a family room, office, or rental suite, adds square footage and increases value.

Exterior improvements: Curb appeal matters. New windows, siding, or landscaping can make a strong first impression.

Energy-efficient upgrades: New insulation, windows, or HVAC systems not only reduce utility bills but also attract buyers.

Kitchen, Bathroom, and Basement Costs in Ontario

Renovation prices in Ontario can vary widely depending on the size of the space, materials, and whether you hire contractors or do some work yourself. Here are some realistic cost ranges to help you plan:

Kitchen Renovation Costs

Basic refresh (paint, fixtures, small updates): $10,000 to $25,000

Full remodel (new cabinets, appliances, flooring): $25,000 to $60,000+

A full kitchen renovation usually gives the highest return on investment, often recouping up to 70%–80% of the cost when you sell your home.

Bathroom Renovation Costs

Basic upgrade (fixtures, paint, vanity): $7,000 to $15,000

Complete remodel (tile, shower, plumbing, luxury upgrades): $15,000 to $30,000+

A well-done bathroom remodel can boost your home’s appeal and value significantly.

Basement Finishing Costs

Basic (flooring, walls, lighting): $30,000 to $50,000

Full basement apartment (kitchen, bath, separate entrance): $50,000 to $100,000+

Finishing a basement to add livable square footage or a rental unit can add huge resale value and even create rental income to help pay off your second mortgage.

These estimates give you a general idea, but it’s wise to get multiple contractor quotes before committing.

Second Mortgage vs. HELOC for Renovations

Homeowners often ask whether they should get a second mortgage or a Home Equity Line of Credit (HELOC) for home renovations. Both use your home equity, but they work very differently. Always consult a mortgage professional who can review your full financial situation and recommend the best fit.

Second Mortgage

Lump sum: You receive a set amount of money up front.

Fixed or variable rate: Private lender rates start around 6.99%.

Fixed repayment term: Monthly payments are predictable.

Easier approval: Private lenders have fewer credit and income restrictions.

Best for large, one-time projects like a full kitchen or basement reno.

HELOC

Revolving credit: Works like a credit card. You only borrow what you need when you need it.

Fixed or variable rate: Rates from banks typically start at 7.49% but some fluctuate with prime rates.

Strict approval: Banks require strong credit and proof of steady income.

Best for ongoing or smaller upgrades over time, like painting, fixtures, or landscaping.

Which is better?

If you need a large lump sum upfront and don’t qualify for a traditional bank loan, a second mortgage through a private lender may be your best choice. If you qualify for a HELOC and plan to do smaller projects over time, a HELOC offers flexibility.

Alternative Ways to Finance Home Improvements

A second mortgage is just one way to fund your home renovations. There are other financing options you can consider, depending on the size of your project, your credit, and how much equity you have.

1. Personal Loan

A personal loan is an unsecured loan you can get from a bank, credit union, or online lender. It’s often used for mid-sized renovation projects.

Interest rates: Typically between 9% and 14% depending on your credit score.

Loan size: Usually capped at $50,000 or less.

Qualification: Lenders will require proof of income and good credit history. Approval can be quick, but rates are higher than secured loans.

2. Store Financing or Retailer Payment Plans

Many big box home improvement stores and contractors in Ontario offer financing programs for renovations. These can be helpful for appliances, flooring, windows, roofing, or full renovation packages.

Interest rates: Some offer 0% interest promotional periods, but rates can climb to 18% to 29% if not paid off in time.

Loan size: Varies based on the retailer and project cost.

Qualification: Generally easier to qualify for than a bank loan; credit checks are still required, but income documentation may be less strict.

3. Credit Cards

Credit cards should only be considered for very small upgrades or finishing touches due to their extremely high interest rates.

Interest rates: Typically between 19% and 24% in Ontario.

Loan size: Small limits compared to other options.

Qualification: Based on your credit history. Quick approval but very expensive if the balance isn’t paid off immediately.