Second Mortgage Ontario: Lender Rates and Comparison

A second mortgage can help if you dont want to break your lower-rate first mortgage or if your financial picture has changed so that you no longer qualify for traditional prime lending rates. More details below…

A 2nd mortgage works like a regular first mortgage, but if the property is sold, the second mortgage lender gets paid out after the first/primary mortgage. If there isn’t enough equity left after the first mortgage is paid out, the second mortgage lender might not get paid. 

Because there is often more risk to second mortgage lenders, rates are usually higher than first mortgages. There can be more flexibility built into second mortgages, such as interest-only payments or even no mortgage payments, to help fit the homeowner’s unique situation.

Getting a second mortgage can be easy if the property has more than 25% equity. That is, the property’s purchase price or appraised value has at least 25% down payment or equity. 

This typically leaves room for 5%  – 10% of the property value to be secured by a second mortgage, depending on the lender. Much less emphasis is placed on income or credit score, although strengths or weaknesses can affect the second mortgage rate.

Second Mortgage Rates Ontario Compared

The following are second mortgage lenders available in Ontario and in some cases other Provinces where indicated. The second mortgage rates are compared along with other lender features.

Second Mortgage Lender Second Mortgage Rates
Buck Financial 12.75%
Newhaven 10.99%
River Rock 9.99%
Fisgard 11.49%
MCI 11.49%
Magenta 11%
Brightpath 11%
Calvert 12%
Altawest 11.5%

>> Connect with Altrua Financial for lower second mortgage rates with the best terms! <<

Benefits of Second Mortgage Lenders in Ontario

The benefits of a second mortgage will depend on your situation. For some, the benefit of the second mortgage is to access home equity to consolidate higher interest debt without breaking the lower rate first mortgage. 

For example, if the primary, first mortgage is at 3.5% and has 3 years remaining, does it make sense to refinance and break this into a 6% mortgage? A second mortgage can leave the lower rate first mortgage rate without penalty while delivering the needed funds.

Another example of a second mortgage benefit is if the application to refinance for a bigger first mortgage no longer qualifies based on income or credit, given much higher mortgage rates in 2024. In this case, a private second mortgage lets the homeowner access the needed quality with a much easier qualification and fewer documents. The second mortgage can even be set up to postpone mortgage payments for a year.

Alternatives to Second Mortgages

The biggest alternative to the second mortgage is to refinance the existing first mortgage with an equity takeout. This means a new mortgage and rate replace the existing first mortgage. This can be a benefit if:

  • The second mortgage will be much larger than the first mortgage, and the second mortgage rate will be higher.
  • Refinancing involves savings on the first mortgage (for example, a better mortgage rate).
  • There is an overall cost benefit to refinancing and taking out equity with a first mortgage vs adding a second mortgage.

Other second mortgage alternatives include paying down the existing debt, especially if the debt is relatively smaller and the second mortgage rates/ costs are comparable to what is already paid (often they are!). Finally, an un-secured credit line or loan may be more cost-efficient depending on the funds needed and credit score.

It’s essential that when working with your mortgage broker, options and alternatives are provided based on your situation.

Paying off a Second Mortgage

The second mortgage is typically not seen as a long term financing solution. Even the Home Equity Line of Credit (HELOC) rate is high, typically at ‘prime +’ (at the time of writing, 7.7% for a HELOC). 

But whether it’s a private second mortgage or HELOC, it’s important to have a plan to pay off the second mortgage. This plan will often involve a refinance and consolidation with a lower rate first mortgage. Sometimes it’s harder to qualify due to bad credit or lower income, but the plan could involve increasing credit to help pay out the second mortgage,