What a second mortgage is
Your first mortgage sits in first position on title. A second mortgage is registered behind it, in second position. Nothing about your existing mortgage changes - the rate, the term, and the payment all stay as they are. The second lender advances a lump sum secured by whatever equity remains after the first mortgage is accounted for.
How much you can borrow in Toronto
Second mortgage lending is measured by combined loan-to-value (CLTV): your first mortgage plus the new second, divided by the appraised value. Most GTA lenders work to roughly 80 percent, with the strongest urban properties reaching 85 percent and occasionally 90 percent.
- Home value $900,000, first mortgage $500,000, 80 percent CLTV: about $220,000 available
- Home value $1,400,000, first mortgage $900,000, 80 percent CLTV: about $220,000 available
- Condos and rural properties are usually held to lower limits than detached Toronto homes
Who lends on second mortgages
Banks rarely register behind another lender. Second mortgages in Toronto come from B lenders, mortgage investment corporations (MICs), and private investors. Each has a different appetite for property type, location, credit, and loan size, which is why a broker shopping several of them at once usually produces a better number than calling one lender.
What it costs
A second mortgage always prices above a first because the lender is behind you in the repayment line. Expect a higher rate plus a lender fee and brokerage fee, along with legal and appraisal costs. Most terms are six to twenty-four months and many are interest-only, which keeps the monthly payment manageable while you fix the underlying issue.
The exit matters more than the rate
A second mortgage is a bridge, not a destination. Before you sign, you should know exactly how it ends: refinance both mortgages into one new first, sell the property, or renew once while the plan finishes. Files go wrong when nobody plans the exit at the start.
Frequently asked questions
- Is a second mortgage a good idea in Toronto?
- It is a good idea when it solves a defined problem - consolidating high-interest debt, clearing arrears, funding a renovation - and you have a realistic exit within a year or two. It is a poor idea as a way to fund ongoing shortfalls.
- Will a second mortgage affect my first mortgage?
- No. Your first mortgage keeps its rate, term, and payment. That is the main reason homeowners choose a second over a full refinance when they hold a low-rate first mortgage.