Second Mortgages in Toronto: What You Need to Know

As real estate prices in Toronto continue to climb, homeowners are sitting on a powerful financial tool: their home equity. One of the most strategic ways to access that equity without refinancing your first mortgage is through a second mortgage.

If you're looking to consolidate debt, invest in property, or fund a renovation, a second mortgage can help. But it comes with unique risks and requirements.

Here’s what you need to know about second mortgages in Toronto, and whether this option is the right move for your financial goals.

What Is a Second Mortgage?

A second mortgage is a loan secured against your home, taken out in addition to your existing first mortgage. You’re essentially borrowing from the equity you’ve built in your property.

Second mortgages can come in two forms:

• Home Equity Loan: A lump sum with a fixed repayment term and interest rate

• Home Equity Line of Credit (HELOC): A revolving credit line you can draw from as needed

When Does a Second Mortgage Make Sense?

Homeowners in Toronto typically consider second mortgages for:

• Consolidating debt like high-interest credit cards or personal loans

• Renovations and home improvements

• Helping a family member with a down payment

• Funding a business venture

• Bridging a temporary cash flow gap

• Real estate investing

If you’re asset-rich but cash-limited, a second mortgage can provide flexibility without disrupting your primary mortgage terms.

Second Mortgage Requirements in Toronto

Approval depends on multiple factors:

• Home equity: Most lenders allow up to 80 to 90 percent combined loan-to-value (CLTV)

• Credit score: A score above 620 is generally preferred, but private lenders can be more flexible

• Income and liabilities: Debt service ratios still apply, even for second mortgages

• Property type and location: Lenders prefer properties in urban or high-demand areas like Toronto

If you're applying through a private lender, approval may be based more on equity and property value than on income.

Compare how different lenders evaluate your eligibility with this detailed breakdown by Ratehub.ca

How Much Can You Borrow with a Second Mortgage?

Let’s say your home is worth $1,200,000, and your current mortgage balance is $650,000.At a maximum CLTV of 85 percent, you may be eligible to borrow:

($1.2M x 85%) – $650,000 = $370,000 in available equity

Keep in mind that interest rates for second mortgages are usually higher than your first mortgage and vary based on lender type:

• Private lenders: 8 to 13 percent

• B-lenders: 6 to 9 percent

• HELOCs (bank-issued): ~7.2 percent (variable)

Second Mortgage vs. Refinancing: What’s the Difference?

Feature	Second Mortgage	Refinance
Keeps First Mortgage	Yes	No
Accesses Equity	Yes	Yes
Typical Use	Short-term needs	Long-term financial reset
Interest Rate	Higher than 1st mortgage	Often lower (blended or new)
Costs & Legal Fees	Moderate	Higher due to full discharge

If you’re mid-term on your current mortgage with a low rate, a second mortgage could save you from costly break fees.

Risks to Consider

• Higher interest rates

• Shorter terms (usually 1 to 2 years)

• Added legal and appraisal fees

• Increased monthly obligations

Second mortgages are powerful tools but should always be part of a well-structured financial strategy. Our role is to help ensure the numbers make sense long before you sign.

Is a Second Mortgage Right for You? Let’s Talk.

At Seventy Seven Park, we specialize in structuring smart financing solutions that align with your bigger financial picture. Whether you’re looking at B-lender options, private lending, or a full refinance strategy, we’ll help you weigh your options with clarity.

Call Eduardo Pontes, Managing Director & Mortgage Broker Level 2

416.455.3800

epontes@seventysevenpark.ca

Let’s unlock the equity you’ve earned, strategically.

START YOUR APPLICATION TODAY