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Second Mortgages in Pickering – What You Need to Know

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Taking out a second mortgage on your Pickering home may be seen as risky, since a home is one of the biggest investments one makes. Being educated on what a second mortgage is and how it works, its benefits, and costs can help you choose the right mortgage type and lender. For Pickering homeowners, second mortgages can be a boon if chosen carefully.

What Is a Second Mortgage and How Can It Be Used

A second mortgage is a loan taken against the same home or property on which a first mortgage is already in place. A second loan can only be taken on the same property when there is at least 15% equity in the house. Equity is the current value of the home minus the balance mortgage remaining on the property. With the recent real estate boom across GTA, the value of Pickering homes has also increased. Many homeowners are capitalizing on the increase in equity of their home by taking out a second mortgage.
Homeowners may take out a second mortgage for a number of reasons, including debt consolidation, home repairs, investments, or a child’s education. Generally, the interest rates on a second mortgage are lower than credit card loans, making it an attractive option when a large sum of money is needed.

Choosing a Lender

Just like a first mortgage, homeowners should shop for the best rate and assess if there are any hidden costs associated with the second mortgage. Second mortgage interest rates are generally higher than first mortgage rates. In case of a default, the first mortgage gets paid off first. This makes second mortgages riskier for lenders. Your primary lender may be offering the most suitable rate and product type that meets your requirements. If that is the case, you have gotten a good deal. By getting a second mortgage from your primary lender you only have to make one monthly, low-interest payment. However, by evaluating the rates offered by other lenders, you may be able to get a better interest rate for more equity, with low processing fees and closing costs.
Typically, lenders can process second mortgages from 80 – 90% of the loan-to-value (LTV). This means that if your house is worth $500,000, then you can get a mortgage for up to $450,000. If your first mortgage is $300,000, you can get a second mortgage of $150,000. Choose a lender that can give you the maximum equity from your home that meets your requirements, at the best interest rate and lowest associated costs.


Pickering homeowners need to be aware that second mortgages also have closing costs. Home appraisal fee, processing fee, legal fee, title search and insurance may be included in the closing costs. These can be anywhere from 2 to 5% of the value of the second mortgage.
Chosen with care, second mortgages are an attractive option for Pickering homeowners to use the equity in their homes, when large sums of money is needed. Whether it is to pay off a high-interest debt or for major home renovations, second mortgages offer more flexibility and lower interest rates than most of the other credit products.  


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