Second Mortgage Financing in Ontario

Second mortgage financing in Ontario is something that many homeowners use to raise capital in order to finance things like debt consolidations or home improvements. Refinancing your home by taking out a second mortgage is slightly more complex than taking out a regular loan or line of credit because it involves securing the loan against your home. Second mortgages offer many benefits; they are often less interest, offer more flexible repayment terms and enable you to affordably borrow large sums of money. A second mortgage is an excellent tool for taking out a large loan and well worth the extra steps involved.

This first step in the second mortgage process is making an application. It is important to ensure that the information you provide to the bank or mortgage broker is completely accurate. Gather all your paper work such as paystubs and bank statements, then investigate house sales in the area to get a good idea of your home's value etc. Over-estimating your income or property value could result in an initial approval but ultimately could cause you problems when your application goes into the verification process.

There is key information that must be disclosed when you apply for a mortgage. In addition to your income and property value having to be accurate and verifiable, your property must be owner occupied and must not be under construction. If it happens that your property is a rental property, is under construction or you cannot verify your income, it will change the nature of your financing.

Once the application has been approved, if your second mortgage is not CMHC insured you will be requiered to have an appraisal done on the property. A property appraiser will come to your home to do an inspection and then issue a report to the lender that validates the value of the property. You will have to pay for the appraisal, and payment should be made at the time of inspection.

After the appraisal is completed you will have to go to the lender or your Mortgage Broker to sign the preliminary paper work and will have to then provide any supporting documents that they require like your current first mortgage statement and income verification. It is always recommended that you ask the lender or Mortgage Broker what type of supporting documents they will require before having your appraisal done. While they are not needed until it is time to sign the paper work, providing them in advance and getting them approved will ensure that you don’t face any surprises after the appraisal is completed.

After you have signed all the paperwork, it will then be sent to a lawyer so that they can prepare the final documents. You will have to attend an appointment at the lawyer’s office where you will sign the all pertinent documents, the lawyer will register the mortgage and you will be able to pick up your funds within 1-2 business days.

It takes about 2-3 weeks to arrange a second mortgage but it can be well worth the wait.


Article Source: - Adapted from "Second Mortgage Financing in Ontario" by Paul Mangion (The Mortgage Centre, Mississauga)

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The Hisey-McDermott Team

The Hisey-McDermott Team

Sales Representative
CENTURY 21 Miller Real Estate Ltd., Brokerage*
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