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9 reasons for getting a second mortgage

Homeowners have various reasons for getting a second mortgage; let’s explore some of the motivations for getting a second mortgage in Canada.   

A second mortgage is a second loan on an already mortgaged property, allowing a homeowner to borrow against the equity built up behind their first mortgage. It is called a “second” mortgage because it falls behind the original mortgage (first position). They are often used for several purposes including consolidating debt, making large purchases and renovating a home. Read on to learn more reasons homeowners use second mortgages in Canada.

1. Get lower interest rates compared to unsecured loans  

Since it is secured against a property, homeowners can receive better interest rates compared to credit cards. Second mortgage rates are typically higher than rates for first mortgages, but they can still be more affordable than other forms of credit facilities. Generally, second mortgage rates are lower than unsecured personal loan interest rates.

Learn more about the difference between: first mortgage vs second mortgage 

2. Make a significant purchase  

Second mortgages can give access to a substantial amount of money, which can fund significant expenses like a home renovation project or your child’s education. In this case, home equity loans are helpful, allowing homeowners to use their home equity to access a large amount of funds relatively quickly.   

A homeowner smiling in their home

3. Generate rental income

One of the ways homeowners use a second mortgage is to invest in another house, spruce up the house and rent it out so they can generate rental income each month, which they can ultimately use for personal expenses or to pursue other financial goals.

4. Pay off a large outstanding debt 

The funds from a second mortgage can also pay off a large outstanding debt. As a homeowner with enough equity available within their homes, it may be more productive to access the financial value of the equity and use it for debt repayment. In most cases, they come at a lower interest rate than unsecured credit cards or personal loans.

5. Invest in your business  

The funds from a second mortgage can give entrepreneurial homeowners the financial support they need to achieve their business goals. Given that it can be difficult for entrepreneurs to secure funding through conventional means, tapping into the equity in their homes to access funding can be a good option.

A business man holding up a model of a home

6. Access financing even with low credit score 

Banks will usually look at the applicant’s credit score and income level to assess how risky it is to lend them money. As such, homeowners who don’t have a good credit score or income can find it hard to qualify for a loan of their choice with a big bank.   

As a solution, homeowners make use of an alternative lender and leverage the equity in their homes to secure a second mortgage. This is easier to qualify for because these lenders usually prioritize the amount of equity available in their homes over their credit score and income levels.

7. Buy a new property due to a lifestyle change  

After living in the same home for several years, homeowners may have decided to move on to a new property. The reason could be because they are newly married and want to find a home with their spouse, or they are looking for a cheaper homeIn either case, homeowners use their existing home equity to purchase a second home.

8. Get approved quickly 

Most second mortgage applications tend to be approved and processed quickly, especially compared to other loan options with banks, which sometimes take weeks to deposit your funds. Second mortgage lenders don’t only need a few basic documents outlining the details of your first mortgage to process your application. Lenders like Alpine Credits can get you approved within a few days.

9. Consolidate loans 

If you are a homeowner juggling multiple loans, then a second mortgage could be a good solution. Homeowners can find it much easier to secure a second mortgage and use it to consolidate their loans. Homeowners get the benefit of a streamlined monthly payment and potentially lower interest rates. 

Conclusion: Get a second mortgage at Alpine Credits

Alpine Credits helps homeowners tap into the financial potential of their homes with customized home equity solutions. We have helped homeowners in British Columbia, Alberta, and Ontario with flexible home equity solutions that can be used for various financial purposes, including home renovations and loan consolidation.   

If you want to obtain a second mortgage, you can apply now, and a Financial Solutions Specialist from Alpine Credits will contact you to help you navigate the application process.

Apply now

Frequently asked questions

Alpine Credits provides home equity loans. We offer these loans with quick approval times, flexible eligibility criteria, and near-instant bank deposits.   

You can use second mortgages for multiple purposes. They can be used for home renovations, loan consolidation, or investing in your business

The lending criteria for second mortgages are more lenient than other loans, given that the borrower’s home secures them. As such, if you are an existing homeowner with enough equity, getting approved will be a smooth process.