Loan to value ratio
The combined loan amount of your first and second mortgage compared to your home's value, known as loan to value, is the single biggest driver of pricing. Lower combined loan to value generally means better terms, since the lender has more equity cushion protecting their position.
Property type and location
Well located, easily marketable properties in areas like central Toronto tend to get more favourable terms than rural or unique properties, since lenders factor in how quickly and easily they could resell the property if needed.
- Urban versus rural location
- Detached versus condo considerations
- Overall marketability of the property
Credit and income
While private lenders are more flexible than banks, stronger credit and documented income can still improve pricing compared to a file with significant credit issues or no verifiable income at all.
Term length and purpose
Shorter terms and clearer, well explained purposes for the funds, such as debt consolidation with a clear repayment plan, tend to be viewed more favourably than open ended or unclear uses of the money.
Frequently asked questions
- Does a lower loan to value always get me a better rate?
- Generally yes, since more equity cushion reduces the lender's risk, though other factors like credit and property type also play a role.
- Can I negotiate the rate on a second mortgage?
- There is often some room to negotiate, particularly if your file is strong or you are comparing offers from multiple lenders.
- Do condos get worse second mortgage terms than houses?
- Sometimes, since condos can have additional considerations like maintenance fees and building specific factors, though well located condos in Toronto are still commonly financed.