Apply For a Second Mortgage in Canada

Apply For a Second Mortgage in Canada

Written by Caitlin Wood
Last Updated July 29, 2015

A second mortgage is typically taken out against a property that already has a loan against it, most often for the purpose of securing a large sum of money to either pay off debts or invest in something else. You’ll often hear a second mortgage being referred to as a home equity loan; the two terms are synonymous as a home’s equity is used to secure a second mortgage.

Taking out a second mortgage means you’ll be taking on more debt, so it’s your best bet to make sure you completely understand all the risks and costs of a second mortgage before you sign on the dotted line.

Why take out a second mortgage?

There are many reasons why someone might want to take out a second mortgage; it varies from case to case and person to person. Here are a few of the most common motivators for applying for a second mortgage:

  • Refinancing your first mortgage to consolidate and pay off high interest debt
  • For unexpected expenses that need to be handled right away
  • Home improvements or renovations
  • To repay unsettled accounts that are in collections
  • If an opportunity to invest in something or to make money presents itself

Lifestyle, income increases or decreases, financial issues and even money making opportunities are all great reasons to get a second mortgage. Just remember no matter what your reason for wanting a second mortgage is, it’s extremely important that you understand the potential risks and are financially stable enough to take on even more debt.

Can I take out a second mortgage?

If you get approved by a bank or private lender then you can absolutely take out a second mortgage, the more important question to ask yourself is, should I take out a second mortgage? Second mortgages are extremely tempting as they allow you access to a large amount of money that you wouldn’t have been able to get otherwise. Because mortgages are often seen as good or purposeful debt, sometimes people decide that a second mortgage is a great idea without really giving it any thought. In reality second mortgages come with risks and costs just like any type of debt:

  • The APR. Second mortgages carry slightly more risk for the lender than a first mortgage; this means that your interest rate will probably be higher. Shop around and compare rates before you make your final decision, taking on a second mortgage with an extremely high interest rate could lead to financial issues that you don’t want.
  • Default penalties. All loans come with penalties for late or missed payments; people often don’t consider this when applying for first or second mortgages. If you can, look around for a second mortgage that doesn’t have default penalties, or at least reasonable ones.
  • General closing costs. Once you’ve chosen which lender you want to work with you should ask for a list of all other fees and closing costs, being prepared will help you budget better and you’ll be less shocked when the bills start to roll in.

The best advice we can give you is to make sure you can actually afford a second mortgage before you apply for one. Create a budget that includes a second mortgage payment and live that way for a month or two before you apply, this way you’ll be able to tell if you can realistically afford a second mortgage or not.

Advantages of a Second Mortgage

A second mortgage can be a great option for many people; it can provide extra cash for a new business venture or help you pay off your higher interest debt. But don’t forget that there are so many other advantages to taking out a second mortgage as opposed to another type of loan, here are a few:

  • There are countless second mortgage lenders available to you, whether you choose to go with a traditional institutional lender or a private lender.
  • Qualifications are typically based more so on your home’s equity rather than your credit history or income.
  • Second mortgages usually come with more flexibility and terms that can negotiated.
  • Up to 90% of the value of your house can be used to get a second mortgage.

Want More Information?

Check out our other articles on mortgages and second mortgage for all the extra information you need to make the best choice for you and your current financial situation.

Also visit out application page and get in contact with one of our loan specialists who can answer all your second mortgage questions.


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Caitlin Wood is the Editor-in-Chief at Loans Canada and specializes in personal finance. She is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. Caitlin has covered various subjects such as debt, credit, and loans. Her work has been published on Zoocasa, GoDaddy, and deBanked. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security.

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