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If you’re thinking about taking out a second mortgage on your home, you know how much information is out there. So how do you decide if it’s the right route, and if so, how can you find the best second mortgage company for you?

What is a Second Mortgage?

First, let’s define what a second mortgage is and why you might consider one. A second mortgage is secured borrowing against the equity in your current home. Rather than having your equity tied up in your home until you’re ready to sell at some point in the future, a second mortgage allows you to use a portion of it right now.

There are several reasons you might think about taking out a second mortgage. If you, like many Canadians, are carrying a heavy load of high-interest debt, debt consolidation is an option. Second mortgages generally have lower interest rates than credit cards.

Other reasons include:

  • Paying off overdue taxes or late mortgage payments

  • Renovations

  • Education expenses

  • Financing a vehicle

  • Starting a business

Whatever your reason, it’s important to know what your borrowing will look like and how to find the best second mortgage company to provide it. There are two basic types of second mortgages offered in Canada: a Home Equity Line of Credit (or HELOC), or a home equity loan. A third option that might apply in some cases is private lending.


A Home Equity Line of Credit acts like a revolving line of credit, allowing you to spend up to a given amount of the equity you have in your home. Your interest rate will be variable, fluctuating with the prime rate, and you’ll have a minimum payment each month based on how much you owe.

Because you can continue to spend and repay your HELOC, you have more flexibility in how you use your equity. But be careful to manage your spending, like you would with a credit card, so you don’t get into a situation where you’ve borrowed beyond your means.

Home Equity Loan

Unlike a HELOC, a home equity loan is a one-time lump sum deposited into your bank account by your lender. It might be a fixed rate or variable interest, and your repayment schedule will be set.

If you know the amount your second mortgage needs to finance, a home equity loan might be your best choice. For example, if you need $20,000 for tuition to go back to school, you can apply for a loan for that exact amount. On the other hand, if you need to do renovations and you’re just not sure what the final cost is going to be, a HELOC might be a better option for you.

Private Mortgage

While private lending isn’t specifically considered a second mortgage, there are lenders willing to offer financing based on the equity you hold. When other options aren’t available to you, private lending might work for you.

Who Offers Second Mortgages?

The Big 5 Banks in Canada all offer HELOCs. But the big banks are not the only companies to provide second mortgages. Many smaller banks and private lending corporations offer competitive options. It pays to do your homework and shop around for the best rates and terms.

Ask a Licensed Mortgage Broker

You could contact multiple lenders and compare the details, but the easiest way to find the best second mortgage company for you is to make an appointment with your licensed mortgage broker. They have experience and contacts in the industry to help you make an informed decision. With access to lenders you might not even know about, you’ll be able to weigh all your options. Ask your broker today.



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