Second Mortgages Toronto

A 2nd mortgage is a secondary loan secured in addition to a first or primary mortgage.  Two common types of second mortgages utilized are home equity loans and home equity lines of credit (HELOC). Similar to a first mortgage, there is usually a monthly payment obligation. In some scenarios, the loan can be prepaid or partially prepaid, which means the payment (or part of the payment) is withdrawn from the gross loan at the time of origination. Most HELOC and second mortgage products will have interest only payments.

A second mortgage involves borrowing from the equity in your current home. It can be used for various financial purposes. The most common uses for a 2nd mortgage are: consolidating high-interest or credit card debt, financing home repairs or improvements, providing financial help to a family member (for down payment on a purchase) or other investment opportunities.

Obtaining a 2nd mortgage typically involves the same steps as obtaining your initial mortgage. You submit an application to second mortgage lenders in Toronto and provide documentation regarding all income, assets and debts.

Then, you can let us take the wheel. As a 2nd mortgage broker, we negotiate on your behalf to get the best possible rates from an abundance of different lenders. We’re connected, tech-enabled and experienced: a formidable combo in the mortgage industry.

At Stonefield Mortgage, we’ve worked with clients across the GTA to secure a second mortgage on their property – whether they want to renovate their homes, invest in additional real estate, or consolidate their debts.

A second mortgage loan is a loan taken out against a property with a first mortgage or a registered lien, and is generally used as a short-term interest-only loan with a specific purpose.

As you pay into your first mortgage, you’re building equity in your home. Second mortgage lenders can help you capitalize on that equity to obtain funds for various reasons (see the sections below).

A second mortgage is registered behind the position of the first mortgage, making it a higher risk for lenders. In the event of a mortgage default or a power of sale, the mortgage in the first position has priority over the second mortgage (hence the name).

Due to the nature of this risk, the interest rates on a second mortgage will be higher than on a first mortgage.

For most people, a home is their largest investment – and every mortgage payment they make goes toward building equity in that sizeable investment. A 2nd mortgage allows you to take advantage of the equity you’ve built.

Why take advantage of your equity? The most common reasons for seeking second mortgage lenders are:

• Debt consolidation and credit improvement
• Investment opportunities (secondary property, investing in your business, etc.)
• Home renovations and improvements

Qualifying for a 2nd mortgage in Toronto starts with the application process.

At Stonefield Mortgage, our application process is simple and straightforward. Our financial experts review your income, assets, and debts to determine your best options for a second mortgage. Once we have the information, we’ll begin negotiating with the top 2nd mortgage lenders in the GTA until we find the right mortgage solution for your needs.

While there are advantages to both 2nd mortgages and mortgage refinancing in Toronto, it’s important to understand the difference between these terms to determine which better suits your financial needs.

A second mortgage involves borrowing against your home’s equity, and the funds are either given in a cash lump sum or through a credit line, based on the homeowner’s preference. There are two types of 2nd mortgages — HELOCs or home equity loans. The first gives continuous access with variable or fixed rates, while the latter is provided as a lump sum payment and paid back in monthly installments at a fixed interest rate.

 involves using a new loan to replace your primary mortgage. Refinancing allows you to choose a new lender, interest rate, or change your loan term. This is often used to cover financial expenses, renovate the home, or adjust to changing living costs. You can also stay with the same lender and refinance to increase your loan amount.

In many scenarios, it is recommended to have the maturity date of your second mortgage (when the mortgage term is over) line up with the first mortgage maturity date. This allows a Stonfield mortgage broker the opportunity to refinance the borrowers’ first mortgage to pay out the second mortgage at the time of maturity of both loans, reducing the overall cost of interest.

link to another page?

While the two terms may look similar at first glance, they’re quite different in reality. As mentioned above, second mortgages are secondary loans secured in addition to primary mortgages against your home equity. Just like first mortgages, they must be paid back in monthly installments.

A second property mortgage, on the other hand, is a mortgage secured for a borrower’s second property. For example a weekend retreat cottage in Muskoka, or an investment rental condo in the GTA).  When buying a second property, lenders will look at the same criteria as any other mortgage — your down payment, current income, credit history, outstanding debts, stress test qualification, etc. Depending on your financial situation, you have various financing options here: a refinance or second mortgage/HELOC on your primary property or a first mortgage on your secondary property.  If you’re dipping your toes into “second property” territory, it’s best to consult with an expert mortgage broker to get the right advice!

The most common high-interest debt Canadians have is credit cards. It is very common for people to have multiple credit cards with an annualized interest near 20%!

For example, a client in the past approached Stonefield Mortgage seeking guidance. They had bruised credit due to the high utilization of multiple credit cards and an unsecured line of credit that was not paid and went to collections. The total amount of debt was approximately $95,000. The client owned a home worth approximately $1,200,000 and had a first mortgage on the property for $450,000 at a low-interest rate and term maturity in about a year. A second mortgage loan was the perfect solution for this client. Using the available equity in their home, we secured them a second mortgage loan for a 12-month term with an interest rate of 7.99%. And 2% in total fees.

This second mortgage loan allowed the client to:

• Pay off all their outstanding debt and collections in one lump sum (at a much lower interest rate).
• Improve their monthly cash flow.
• Immediately start improving their credit score and strengthen their overall financial situation.
• With their newly improved credit and more robust financial profile, upon the maturity of their second mortgage, we were able to refinance their 1st mortgage with an A lender. The funds were used to pay out the second mortgage loan – getting them access to an overall lower interest rate..

 (Please note, the above example was as of September 2022. In the current 2024 market, due to rising interest rates, the interest rate for this loan would be closer to 9.99%-10.99% )

While it’s certainly possible to shop for second mortgage lenders independently, knowing the right questions to ask and finding a lender who is a good fit can be challenging. That’s where a financial specialist can help.

At Stonefield Mortgage, our second mortgage brokers understand the nuances of working with 2nd mortgage lenders. Using a powerful combo of know-how, experience and cutting edge technology, our brokers can help identify the best mortgage options at your disposal at the best possible rates – options that fit your unique budget and lifestyle.

Our clients rest easy knowing their brokers are handling the heavy lifting so they can focus on their short or long-term financial goals.

At Stonefield Mortgage, we’re more than mortgage specialists — we’re your financial advocates.

We understand how overwhelming it can feel to determine which mortgage solutions fit your needs and goals. With over 15 years of experience, we’ve helped countless clients across Toronto and the GTA secure 2nd mortgage loans that quickly reduce stress, save interest expenses, help monthly cash flow and align them with their future goals.

We have access to over 40 AAA and B lenders and equally as many private lenders in our contact list. We use innovative application technology to ensure high loan amounts, lower rates, and faster transactions. Our specialists care about our clients and their financial needs and won’t stop until we’ve secured the best possible mortgage. It’s this mix of tireless determination and time-tested expertise that puts us ahead of other second mortgage brokers in the GTA. In the rare scenario that we cannot find a AAA or B lender to suit your needs, we also have built relationships with the best private lenders in the industry.

In recent years in Canada, there has beena sharp rise in the instances of borrowers using a 2nd mortgage to fund the down payment for purchasing second and third properties. This was primarily happening when the second mortgage rates and borrowing rates were very low, and it made financial sense to do so.

With rates rising and the appeal of using a second mortgage for investment tempering, we have seen an influx in borrowers using second mortgages on their properties to consolidate debt, invest in their businesses to drive additional income and help family members with down payments on new property purchases.

We only recommend accessing 2nd mortgage lenders for investment opportunities if the additional monthly costs of the 2nd mortgage loan are well within your debt servicing capabilities and a clear exit strategy is in place to exit the loan. Although a 2nd mortgage loan has a lower interest rate than credit cards and an unsecured line of credit, it should be used primarily as a short-term loan with a specific purpose. It is not wise to use a second mortgage as a band-aid solution for a larger behavioural problem, like spending beyond your means using credit cards. While we can help lower your overall cost of debt in many cases, we are always going to give you the honest and hard truth if your financial position is unsustainable.

Another popular reason for a 2nd mortgage is home renovations and improvements. Some examples include:

• Repair ongoing wear and tear within the home
• Improve your current living space (remodeling kitchen, bathrooms, etc.)
• Improve resale value (Adding a deck, finishing or remodeling a basement)

This will increase your quality of life as you continue to live in your home and improve the resale value when you decide to sell. A 2nd mortgage is an excellent way to tap into your home equity at a low borrowing cost to improve the overall value in the long term. Once improvements are made, you can potentially refinance with your existing 1st mortgage lender or switch to a new lender to increase your loan amount. Your property will require an appraisal to prove the increase in value.

Simply click “Start Your Application” in the top-left corner and follow the prompts. Based on your specific information, we’ll help you determine the best product for your second mortgage loan. From there, we’ll utilize our list of 2nd mortgage lenders in Toronto to ensure you’re approved and receive the best possible rate.

Conversely, if you want some one-on-one advice before taking the plunge, click “Book a Call” (also in that top left corner) for a free chat.

In many cases, a 2nd mortgage loan will come from a private lender. This means that the process is much quicker and less document intensive than with an institutional lender. We will still ask you for your most relevant documents to try to find the lowest cost lender, but once it is determined that a private lender might be the best fit, the process can be fast and simple.

Second mortgages are primarily based on the equity available in the property and the capacity to service the debt, whereas first mortgages have much stricter rules for financing to be completed.

If you obtained your first mortgage through a Stonefield mortgage broker, we likely have the large majority of the documents and information required for the loan. After a quick review of your file, we will determine the updated documents that are required and start working on your second mortgage approval!

The most common fees associated with a 2nd mortgage loan are broker, lender, and legal fees. These fees change depending on the risk level associated with the loan and the loan to value (value of the property vs. the existing debts secured by the property).

In some cases, a broker fee or a lender fee may be waived or reduced, but legal fees will always be necessary. Legal fees can vary depending on the complexity of the deal and the amount of work required by the lawyers.

This is an excellent question! A second mortgage loan can be very flexible in terms, allowing for:

• Monthly interest-only payments
• Partially prepaid payments to reduce the monthly payment
• Fully prepaid loans, so there are no monthly payments to be made

For example, let’s say you are looking to get a second mortgage of $100,000 on your property at an interest rate of 10.99% for a term of 12 months.

To determine your monthly payment, you would take the loan ($100,000) x the interest rate (10.99%) and divide that number by the length of the term (12 months). This represents the cost of an interest-only loan.

$100,000 x 10.99% = $10,990

$10,990/12 = A monthly payment of $915.83

How does this affect your options now that we understand the monthly payment?

You could take this loan with monthly payments of $915.83.

The interest portion of the second mortgage loan could be partially prepaid with an amount you are comfortable with.

Let’s for example assume you;d like to make payments of $300 per month.

$915.83-$300=$615.83 x 12 = $7,389.96 would be reduced from the loan amount of $100,000*

The interest portion of the second mortgage loan could be fully prepaid, where $10,990 would be reduced from the loan amount of $100,000

*Please Note: In all of the above scenarios, the loan amount that you receive is the gross loan minus the fees associated with the loan, which include lender fees, broker fees, and legal fees.

Most commonly folks refer to second mortgages as loans where the lender gives the borrower a lump sum of money, which is then repaid over a predetermined period. You can however have a HELOC in 2nd position behind your first mortgage. A Home Equity Line of Credit (HELOC) is a revolving line of credit, secured by your home. Being a true line of credit product, you qualify for a borrowing limit which is registered onto your title. You are then charged interest only on the amount of money you take from this account. This is a very popular option for borrowers who are looking for access to additional funds without the requirement of a large sum immediately. A HELOC typically has a lower interest rate than an unsecured line of credit.

The major risk involved with a second mortgage loan is the additional financial obligation. 

It’s always best practice to have skilled counsel in your corner. At Stonefield Mortgage, we work closely with our clients to help them understand the benefits and risks associated with 2nd mortgages and 2nd mortgage lenders. Our simple and efficient application process will help you determine the kind of second mortgage you qualify for — so you can decide if you can meet your short and long-term financial goals.

Getting in touch with second mortgage lenders in Toronto or wherever you are in the GTA can be a tedious process to go through on your own. 20 calls later (and countless bank visits), you may feel more confused than when you started.

Our 2nd mortgage specialists in Toronto make that connection easy and efficient. With access to over 40 AAA lenders, we take the guesswork out of finding the right lender. Whether you’re looking to get approved for a second mortgage or need to find private mortgage solutions, we help facilitate the process for maximum ease and satisfaction.

We’re near you. Our online process makes our services available to anyone in Ontario. Stonefield Mortgage is proud to be a trusted mortgage specialist, helping Canadians access the top second mortgage lenders in Toronto.

We work with clients across the GTA (and outside of the GTA too) to help them determine the right 2nd mortgage for their needs and communicate on their behalf with the top mortgage lenders to ensure they’re presented with fair rates and conditions.

Whether you’re looking to renovate your home in Vaughan or purchase an investment property in Markham, our trusted 2nd mortgage experts are nearby to help.

Stonefield Mortgage is proud to be a leading mortgage in the GTA, offering a wide range of professional services.

Our second mortgage services are available in:

• Vaughan
• Mississauga
• Brampton
• Etobicoke
• Pickering
• Ajax
• Aurora
• Oakville
• Markham
• Richmond Hill
• Scarborough
• Newmarket
• Whitby
• Toronto

Contact Stonefield Mortgage today to set up a free 15-minute consultation.