Second Mortgages in Canada: How They Work, Who Lends, and What They Cost (2026)

What Is a Second Mortgage?

A second mortgage is a separate loan registered on your home behind your existing (first) mortgage. If the home is ever sold under power of sale, the first mortgage is paid in full before the second lender gets anything. That extra risk is why second mortgages cost more than first mortgages.

The main appeal: you can borrow against your equity without touching your first mortgage, its rate, or its term.

When Does a Second Mortgage Make Sense?

• Your first mortgage has a low rate and breaking it would trigger a large prepayment penalty • You need money for a short period, for example to consolidate high-interest debt, fund a renovation, or cover a gap before a sale • Your income or credit does not currently qualify for a refinance with a bank, but you have solid equity • You are self-employed or recently had a credit event and need time to rebuild before refinancing

It is usually a bridge to something better, not a long-term solution.

Who Offers Second Mortgages?

The big banks rarely offer standalone second mortgages. Most come from three places:

How Much Can You Borrow?

Lenders look at combined loan-to-value (CLTV): your first mortgage plus the second, divided by the home's appraised value.

Example (illustrative): home worth $700,000, first mortgage of $400,000. • At a 75% CLTV limit: $525,000 total, so up to $125,000 as a second • At an 80% CLTV limit: $560,000 total, so up to $160,000 as a second

Private lenders commonly cap CLTV between 75% and 85%, lower in smaller towns and rural areas where homes take longer to sell.

What Does a Second Mortgage Cost?

Expect costs well above a first mortgage:

• Interest rate: private seconds are typically priced several percentage points above first mortgage rates, and many are interest-only • Lender fee: a percentage of the loan, charged at funding • Broker fee: common on private deals, disclosed up front in writing • Appraisal and legal fees, since the second is registered on title • Term: usually 1 to 2 years, with renewal fees if you need more time

Always compare the total cost against the penalty to break your first mortgage. Sometimes a refinance with the penalty is still cheaper than a year or two of second-mortgage interest and fees.

The Exit Plan: The Most Important Part

Because most second mortgages are short and expensive, every one needs a clear way out before it is signed:

• Refinance into one new first mortgage at your first mortgage's maturity, when there is no penalty • Sell the property, for example after a renovation • Pay it off from a known future event, such as an inheritance or a bonus • Rebuild credit or two years of self-employed income, then move to an A or B lender

A second mortgage without an exit plan often ends up renewed repeatedly, with fees each time.

Second Mortgage vs Refinance vs HELOC

The three most common ways to access home equity compared: