A second mortgage is a loan registered behind your existing first mortgage on the same property. It does not replace the first, so you keep your existing rate. It costs more than the first because the lender is second in line if the property is sold under enforcement.
What “second” actually means
It describes position on title, not who lent the money. If the property is ever sold under enforcement, the first mortgage is repaid in full before the second sees anything. That ranking is the entire reason a second costs more.
Many second mortgages are funded by private lenders, but the two terms are not synonyms. A second can be institutional, and a private mortgage can be a first.
When a second beats a refinance
The usual case is protecting a good first mortgage. If your existing rate is well below current pricing, breaking it to refinance can cost more in penalty than the second costs in interest.
A second also avoids requalifying the whole balance against the stress test, and it can close faster. Those three reasons cover most of the files we see.
When a refinance beats a second
When your existing rate is not worth protecting, when you can qualify conventionally, or when the amount is large enough that paying second-position pricing on it is expensive. Run both numbers rather than assuming.
What it costs
More than your first mortgage. Expect a higher interest rate, a lender fee and usually a broker fee as a percentage of the loan, plus legal fees and an appraisal. Every fee must be disclosed to you in writing before you commit.
The risk worth stating plainly
A second mortgage is secured against your home. If you cannot pay it, the second lender can enforce, and in Ontario that means power of sale while in Alberta it means judicial foreclosure. Borrowing against your home to clear unsecured debt converts debt you could negotiate into debt that can cost you the house.
That trade can still be right, when the interest saving is real and the underlying spending has genuinely changed. It is wrong when the balances simply rebuild.
Province matters
Enforcement, disclosure, and closing costs all differ. Read the guide for your province: Ontario or Alberta.
Typical ranges for rates, lender fees, broker fees, loan-to-value, and term are set out in full in the Ontario guide and the Alberta guide. Every figure varies by file and none of them is a quote.
Frequently asked questions
Does my first lender have to agree?
Generally you do not need their consent to register a second, though your first mortgage terms should be reviewed. Your lawyer will confirm.
Can I get a second with bad credit?
Often, because the decision rests mainly on equity. Pricing reflects the risk, and the equity has to be genuinely there.
How much can I borrow on a second?
It depends on the combined loan-to-value the lender will accept across both mortgages, which varies by lender and property. Your broker will tell you the limit for your file.
Can I pay a second out early?
Usually, but check the prepayment terms before signing. Some carry a minimum interest period.