A second mortgage is a loan that is taken out using the equity in your home as collateral. The loan is in the second lien position to the primary mortgage, meaning that if you default on the loan, the lender of the second mortgage will only be able to collect the remaining value of the property after the primary mortgage lender has been repaid.
A second mortgage works by using the equity you have built up in your home as collateral for the loan. The equity is the difference between the current market value of the property and the outstanding balance on the primary mortgage.
To apply for a second mortgage in Canada, you will need to provide documentation such as proof of income and proof of property ownership. Your second mortgage lender will review your credit history, value of your home and more to assess your creditworthiness and determine the loan amount, interest rate and terms of the loan.
The funds from a second mortgage can be used for a variety of purposes including home renovation, debt consolidation, educational expenses and more.