HOW DO SECOND MORTGAGES WORK IN CANADA?

In our previous blog post, we touched on the topic of shrinking equity as this relates to mortgage renewals. In light of this, a look into the workings of second mortgages might be in order. A second mortgage is basically an additional loan on top of the original mortgage loan amount, usually from a different lender. Seconds are often not as favourable as firsts, in that interest rates can be higher, and there can be broker fees payable by the borrower, for instance.

Why would you go for a second mortgage? In a scenario where there is a shortfall of some kind, either in cash or in equity, where the borrower needs to bridge a gap, either to hold on to a property, to do renovations or construction, or to finance a child’s education, a second mortgage is a consideration.

Again, as in our previous post, let’s look to Corben Grant for an in-depth dive into the configuration of a second mortgage. Corben states that accessing home equity, while definitely a possibility, is not as easy as withdrawing cash from the bank. READ MORE