What Is a Second Mortgage and How Does It Work in Ontario?

A second mortgage is a second loan secured on your home, and you must keep paying the first mortgage too. Second-mortgage rates are usually higher because they are riskier for lenders. Exact terms vary by lender, so the written offer matters more than any general figure.

Under the Land Titles Act, a second charge ranks behind an earlier registered first charge, because registered instruments affecting the same interest rank in the order they are entered in the register. That order can be changed by registering a postponement. It also helps to know what is owing on the first mortgage.

You can usually borrow up to 80% of your home's value, minus what you still owe. The home is the security, and if you cannot repay you may lose it through foreclosure. If your second mortgage comes from a private lender, fees can be higher and terms are often short, often one or two years and often interest-only, so have an exit plan and consider independent legal advice before signing. Before signing, work out how you would repay the loan if your income dropped, and have a lawyer review the documents.