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Second mortgage / private
Second mortgage payment
Second mortgages from private lenders typically run prime + 3-8% with 1-3% lender fees. Short terms (12-24 months) by design — refinance into A-tier when you can.
Your scenario
Result
Monthly payment
$7,044
Lender fee
$1,600
Total cost (interest + fee)
$6,123
Private/second mortgage costs are usually meant as bridge financing. Have a clear exit (refinance, sale, asset event) before signing.
What a second mortgage actually is
A second mortgage is a loan secured against your home that sits behind your existing first mortgage. If you default, the first mortgage gets paid out before the second — which is why second mortgages carry higher rates and tighter terms than firsts. In Canada, second mortgages typically come from B-lenders (alternative banks) or private lenders.
Typical rates and fees
- B-lender second: 7–10% rate, 1–2% lender fee, 1–2 year term
- Private lender second: 10–14% rate, 2–4% lender fee, 6–24 month term
- Broker fee: typically 1–2% on private deals (paid by you or split with lender)
- Legal fees: $1,500–$3,000 (private lenders almost always require their own lawyer)
- Appraisal: $400–$700
When a second mortgage makes sense
- You need short-term capital and breaking your first mortgage carries a worse penalty than the second's interest cost
- You're consolidating high-interest debt (credit cards at 19%+) into a lower-rate second
- You're bridging a renovation or business need with a clear exit (refinance into A-tier within 12 months)
- You're short the down payment for an investment property and have strong equity in your home
When it doesn't
- You don't have a clear exit strategy (extending a private second twice gets expensive fast)
- The total stack (1st + 2nd) takes you above 85% combined LTV — your refinance options narrow significantly
- You could break your first mortgage and consolidate into one mortgage at a better blended rate (see blended-rate calc)
- You qualify for a HELOC instead — typically cheaper and more flexible
Second mortgage vs HELOC vs refinance
- HELOC: revolving credit line, lower rate than private second, but qualification harder; ideal if you have time to wait for approval
- Refinance (first mortgage): lowest rate but you pay penalty + legal to break your existing first; best if your first mortgage's remaining term is short
- Second mortgage: fastest funding (often 1–2 weeks for private), highest rate; best for time-sensitive situations or when you can't break the first economically
Risk warnings — read before signing
- Private second mortgages on residential properties are regulated in Ontario and BC, but mistakes still happen. Always work through a licensed mortgage broker.
- Lender fees + broker fees + legal can easily add 5–6% to the cost — calculate the all-in APR, not just the headline rate
- Most privates require power-of-sale or judicial sale rights — defaulting can lose your home faster than missing payments on a bank first
- Don't roll a second mortgage to cover a previous second mortgage's balloon — that's a debt spiral, not a refinance