How Do Second Mortgages Work in Canada?
A second mortgage is a mortgage that you take out on your home after it already has a primary mortgage. You won't be loaned the full value of your home, but rather a percentage of the equity that you have in the home.
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Significance
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With a second mortgage in Canada, it is easy to get approved as long as you have equity in your property. Approval for a second mortgage in Canada is based less on your credit and income qualifications and more on how much equity you have invested into your home.
Features
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A second mortgage in Canada can be expensive because the interest rate is significantly higher than it is for a first mortgage. Interest rates in second mortgages in Canada are often in the 10 to 20 percent range.
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Benefits
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When you take out a primary mortgage, the money is used to buy the home, and you are usually only financed for the selling price of the home; however, with a second mortgage, you can use the money for what you want to use it for, like a vacation home or a home remodel.
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