Second mortgage helps cover unexpected expenses

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A Second Mortgage is a loan, where the lender secures the repayment by placing a second mortgage lien on your property title, using your home as collateral.

The primary difference between second mortgage and equity/refinance mortgage is that you do not pay out your first mortgage. After taking into account the cost of your penalty and CMHC and Genworth insurance premiums it is often more beneficial to leave your current mortgage in place and take a second mortgage for the money you need.

The full amount of your second mortgage is dispersed directly to you by the lender at the time of closing, unless there is an agreement to pay any third parties directly. For example, it may be required for some borrowers to pay off certain debts in order to meet the debt to income ratio.

Second Mortgage Example:
Mr. Smith lives in Lethbridge, Alberta and currently has a first mortgage at prime less .85% with a major bank.  He requires an additional $10,000 for his son’s university tuition.  After reviewing his file we have come to the conclusion that financially it is more beneficial for him to keep his first mortgage and to obtain a second.

Rates and fees on a second mortgage can be higher than other financial institutions, but these are dependent on the risk and the difficulty of the financing proposal.