A second mortgage is a type of loan that is secured against your home in addition to your primary mortgage. It allows you to borrow money using the equity you’ve built up in your home, without having to refinance or sell. Because it’s “second” in priority to your original (first) mortgage, it comes with slightly higher risk for the lender—and often higher interest rates.
How It Works in Ontario
In Ontario, as in the rest of Canada, a second mortgage:
- Is registered on title after the first mortgage.
- Is typically offered as a lump sum loan (as opposed to a line of credit).
- Requires the borrower to continue making payments on both the first and second mortgages.
- Is usually shorter-term (1–3 years) and interest-only or interest + partial principal.
Common Uses for a Second Mortgage in Ontario
- Paying off high-interest debt (e.g., credit cards)
- Funding home renovations
- Covering business expenses or investments
- Managing divorce settlements or tax arrears
- Bridge financing during the sale and purchase of properties
Example Scenario
- Jane owns a home in Mississauga valued at $900,000.
- Her first mortgage balance is $500,000.
- She takes a second mortgage for $100,000 to pay off credit cards and renovate her kitchen.
- Combined loan-to-value (CLTV) is now 66.6% ($600K ÷ $900K).
- The second mortgage is for 2 years at 10% interest-only with monthly payments of ~$833/month.
Pros and Cons
✅ Pros:
- Access to cash without selling your home
- Faster approval than refinancing with traditional banks
- Flexible options via private or alternative lenders
- Lower interest than unsecured loans or credit cards
❌ Cons:
- Higher interest rates than a first mortgage
- Additional legal and appraisal fees
- Increased monthly payment obligations
- Risk of foreclosure if you default
Who Offers Second Mortgages in Ontario?
- Major banks (rarely, and typically only via HELOCs)
- Credit unions
- Private lenders (most common for true second mortgages)
- Mortgage investment corporations (MICs)
Legal Considerations
- Your first mortgage lender must be notified if a second charge is being added
- The second lender must register a lien on title
- You’ll need to use a real estate lawyer to close the deal
It’s important to talk to a mortgage broker to discuss your options and decide which type of loan is right for you. If you would like to get connected with a Canadian mortgage broker to find a solution that works for you, go ahead and complete the form below.
