Looking for Second Mortgages in Ontario?

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Second mortgages are becoming more popular among Ontario homeowners, especially as living costs rise and credit card interest rates stay painfully high. But one of the first questions people ask is: “What’s the interest rate on a second mortgage?”

The short answer is: it depends. Let’s walk through everything you need to know.

Why Do People Get a Second Mortgage?

A second mortgage lets you borrow money using the equity in your home, without touching your first mortgage. That makes it useful in situations where refinancing might not be ideal—like if you’re locked into a low-rate mortgage but still need access to cash.

Here are some of the most common reasons people in Ontario get a second mortgage:

Paying down debt: Credit cards and unsecured loans often carry interest rates of 19–29%. A second mortgage can cut those rates by more than half, allowing homeowners to consolidate their debt and lower their monthly payments.

Major purchases or life events: Some use second mortgages for big expenses like a home renovation, a child’s tuition, or a family wedding.

Living expenses or a rainy day fund: In difficult times—like job loss, illness, or rising inflation—some homeowners tap into their equity just to cover bills and keep food on the table.

Whatever the reason, it’s important to use the funds responsibly. A second mortgage puts your home on the line, so it should be used for real needs—not impulse purchases.

Types of Second Mortgages in Ontario

Not all second mortgages are the same. The type you choose will affect your interest rate, your monthly payment, and how easy it is to qualify.

Here are the three main types of second mortgages:

1. Second Mortgage from a Financial Institution

Offered by banks, credit unions, and trust companies

Usually requires a credit score above 640

You must show verifiable income and a debt-to-income ratio under 45%

Rates are typically fixed

You borrow a lump sum and repay it over 1 to 5 years

This is a good option if you have strong credit and income but want to keep your existing first mortgage untouched.

2. Home Equity Line of Credit (HELOC)

Can be obtained through traditional financial institutions or private lenders

From a financial institution, you'll need:

Credit score above 680 (prime) or 550 (non-prime)

Strong income documentation

Good debt-to-income ratios

From a private lender, there are fewer credit and income requirements, with the most important criteria being the loan-to-value ratio (LTV).

HELOCs are great for ongoing expenses like home improvements, or as a backup fund for emergencies.

3. Home Equity Loans

Provided by private mortgage lenders, not banks

No income or credit requirements

Approval is mostly based on loan-to-value (LTV) and property location

Funds are given in a lump sum generally with a 1-year term

Rates are higher, but they’re easier to qualify for

These are best for borrowers with bruised credit, self-employed income, or urgent financial needs.

Second Mortgage Rates vs. First Mortgage Rates

Second mortgage rates are always higher than first mortgage rates. That’s because lenders in second position face more risk—if you default on your loan, the first mortgage lender gets paid first, and the second lender only gets what's left. To offset that risk, second mortgage lenders charge higher rates.

Here’s how they typically compare in Ontario:

First mortgages from major banks

Usually start in the mid-4% range

Require strong credit and income

B lender first mortgages

Generally fall in the mid-5% range

Easier to qualify for if you’re self-employed or have past credit issues

Home equity loans (second mortgages)

Start at about 6.99%, even without income or credit requirements

HELOCs (Home Equity Lines of Credit)

Start around 7.49% from banks and credit unions

Require good credit and documented income

While second mortgage rates are higher than your first mortgage, they’re still significantly lower than credit cards or payday loans, which often carry interest rates of 20% or more. That’s why many Ontario homeowners still choose second mortgages to consolidate debt or free up cash—especially if breaking their first mortgage would result in penalties or losing a great low rate.

How to Apply for a Second Mortgage in Ontario

Applying for a second mortgage isn’t like applying for a credit card. There are more moving parts, and your home is on the line. That’s why working with a licensed, experienced mortgage broker is so important.

A broker will:

Review your financial situation

Assess your credit, income, and equity

Explain the different options available

Shop the market to find the best lender for your needs

They’ll also handle the paperwork, connect you with appraisers and lawyers, and make sure you don’t get stuck with a predatory lender.

Unlike the big banks, brokers have access to private lenders, B lenders, and credit unions, which gives you more flexibility—especially if your situation is unique or time-sensitive.

Why Are Second Mortgage Rates Higher?

Second mortgage interest rates are higher for one reason: risk.

When a lender gives you a first mortgage, they have the first legal right to your home if something goes wrong. But with a second mortgage, they’re in second position—meaning they only get paid after the first lender is made whole.

This makes second mortgages riskier, and lenders charge higher rates to protect themselves.

The amount of risk a lender takes on also depends on other factors like:

How much equity you have in the home

Your credit history

Your income and employment situation

The type of property (single-family, condo, rural, etc.)

The riskier the loan, the higher the interest rate.

Are Second Mortgage Rates Fixed or Variable?

In most cases, second mortgage rates are fixed—especially with private lenders. That means your rate won’t change during the loan term, and your monthly payments stay predictable.

However, some HELOCs offer variable rates, especially those from banks or credit unions. These rates are tied to the prime lending rate, which means your interest rate—and your monthly payment—can go up or down over time.

In general:

Fixed rate = predictable payments, no surprises

Variable rate = can save you money if rates go down, but riskier if rates rise

For most people looking to manage debt or cover short-term costs, fixed rates offer more peace of mind.

Interest Rates on Second Mortgages in 2025

Second mortgages provide homeowners with access to equity but come with higher interest rates compared to first mortgages. By improving your credit score, reducing LTV, and comparing lenders, you can secure more favorable rates. Understanding the costs, benefits, and alternatives like HELOCs ensures you make informed borrowing decisions. Connect with a mortgage professional to explore your options and choose the best solution for your financial goals.