A second mortgage is a loan secured against your home that ranks behind your existing mortgage. In Ontario, lenders will typically let you borrow until your total mortgage debt reaches about 75 to 80 per cent of your home's appraised value, and approval leans more on your home equity than on your income or credit score.
The word second refers to priority, not timing. If the property is ever sold or pushed into a power of sale, the first mortgage gets paid out before the second lender sees a dollar. That extra risk is why second mortgages cost more. Most in Ontario come from private or alternative lenders, and rates in 2026 generally run from around 8 per cent to 15 per cent, well above what a bank charges on a first mortgage. Lender fees, broker fees, an appraisal, and legal costs get added on top, so the true cost is always higher than the rate alone suggests.
Who actually uses one
Homeowners usually turn to a second mortgage to consolidate high interest debt, fund a renovation, or cover a short term cash crunch. Self-employed borrowers and people with bruised credit use them too, because qualification is equity based. A HELOC can also sit in second position, and it works differently. It is a revolving credit line with a much lower rate, but you need strong income and credit to get one from a bank. A private second mortgage trades a higher cost for easier approval.
The rules in Ontario
Mortgage brokering in Ontario is regulated by the Financial Services Regulatory Authority of Ontario, or FSRA, under the Mortgage Brokerages, Lenders and Administrators Act. If your financing comes from a private or alternative lender, FSRA requires a licensed mortgage broker or Level 2 mortgage agent to handle the file. That rule exists because these loans carry real risk. Miss payments on a second mortgage and the lender can pursue a power of sale just like a bank can.
Treat a second mortgage as a short term tool with a clear exit plan, not a long term financing strategy. The exit is usually a refinance into one new first mortgage or a sale of the property. If you cannot explain how you will pay it out, it is probably the wrong product.
Related reading: What Is a HELOC and How Does It Work in Canada?, What Is Home Equity and How Do You Calculate It in Canada?, and What Is Bridge Financing and How Does It Work in Ontario?.
