TL;DR
If your main goal is lower long-run borrowing cost, compare second mortgage, refinance, and HELOC side by side before committing.
What a second mortgage is in Canada
A second mortgage is a loan registered behind your existing first mortgage on the same property. The second lender sits in second priority, so pricing is usually higher than a first mortgage, and underwriting is stricter on equity, income, and repayment confidence.
Borrowers most often use second mortgages for debt consolidation, renovation capital, business cash-flow support, or short-term liquidity when refinancing is not the best move.
When a second mortgage usually beats refinancing
| Situation | Second mortgage can be stronger when | Refinance can be stronger when |
|---|---|---|
| Large first-mortgage break cost | Breaking your first mortgage would erase expected savings | Your break cost is manageable and refinance lowers blended debt cost |
| Short capital need (12-36 months) | You have a credible near-term exit path and temporary need | You need longer-term restructuring with lower carry cost |
| Preserving first-mortgage contract | Your current first mortgage has favorable rate or portability features | Your current first mortgage terms are no longer competitive or flexible |
A second mortgage should be a deliberate contract decision, not a default fallback.
Total cost stack: what borrowers underestimate
The contract rate is only one line item. Real cost is the combination of pricing, fees, and time in product.
| Cost component | What to verify before signing |
|---|---|
| Interest rate and payment | Monthly carrying cost under base and stress scenarios |
| Lender/broker fees | Any lender fee, broker fee, and fee timing in writing |
| Legal and registration | Legal closing costs, registration charges, and discharge assumptions |
| Exit terms | Penalty math, minimum term, and refinance-readiness timeline |
Who this product is usually right for
- You need equity access now but want to keep your first mortgage intact.
- You can support payments without relying on revolving unsecured debt.
- You have a defined exit plan, often refinance, sale, or major principal paydown.
- You are comparing all-in cost against refinance and HELOC, not headline rate alone.
Who should usually avoid a second mortgage
- Borrowers with no clear repayment or exit timeline.
- Households already tight on debt-service capacity.
- Files where refinance can reduce total borrowing cost with acceptable break cost.
- Borrowers deciding from urgency without scenario modelling.
Second mortgage vs nearby alternatives
| Option | Best use case | Main tradeoff | Deeper page |
|---|---|---|---|
| Second mortgage | Keep first mortgage untouched while accessing equity | Higher pricing and stricter exit discipline | This product page |
| Refinance | Longer-horizon restructuring and debt simplification | Potential first-mortgage break cost | Refinance service |
| HELOC | Flexible revolving access to equity | Variable-rate exposure and payment discipline risk | HELOC product |
| Private mortgage | Edge-case files with speed-critical timelines | Highest carry-cost pressure if held too long | Private mortgage product |
Decision mistakes that raise second-mortgage cost
| Mental model | Typical mistake | Pragmatic correction |
|---|---|---|
| Anchoring | Choosing based on one posted rate or one quote | Compare all-in 24-month cost across second, refinance, and HELOC |
| Present bias | Optimizing for immediate cash without exit timeline | Set a written exit date and refinance trigger before funding |
| Status quo bias | Holding an expensive second mortgage longer than planned | Schedule quarterly review checkpoints with objective refinance criteria |
30-day second-mortgage readiness checklist
- Run refinance analyzer and penalty estimator to confirm whether second mortgage is truly superior.
- Run debt-service ratios and payment scenarios for base and stress budgets.
- Document your target exit window and acceptable all-in cost range.
- Create a backup path in case timeline, valuation, or income assumptions change.
Best next step
- Run refinance vs second-mortgage math using your current balance and timeline.
- Compare available rates before you shortlist lenders.
- Create your free account to save your scenario assumptions.
- Start pre-approval so your primary and backup paths stay executable.
