First Mortgages: How It Works, What to Expect, and Requirements

If you’re planning to buy a home or borrow against your property, the term “first mortgage” is likely to come up early and often. But what does it mean, how does it work, and what should you expect along the way?

Whether you’re looking to get a home equity loan or want to better understand how mortgages work in Canada, this guide breaks down everything you need to know about a first mortgage, from key requirements to how it compares with a second mortgage, and what financing options may be available to you.

What is a first mortgage?

A first mortgage is the primary loan secured against a property, meaning it holds first claim or first lien position. This lender has the legal right to be paid back before any other creditors if the property is sold to cover debts.

Example: If you take out a $400,000 loan secured against a $500,000 property, and it’s the only mortgage on title, that loan is considered a first mortgage. It holds the first claim on the property, meaning the lender is legally entitled to be repaid before any others if the property is ever sold or foreclosed.

First mortgage requirements 

To qualify for a first mortgage in Canada, most financial institutions typically look at the following: 

• Credit scores: A minimum score between 620 and 680. A higher score signals that you’re a reliable borrower and can help you qualify for better interest rates. However, alternative lenders like Alpine Credits often require lower minimums for credit scores. 

• Stable income: Enough to afford your mortgage payments, usually verified with income documents. Some lenders might want to see consistent employment or income over time. 

• Down payment: Minimum of 5% for homes under $500,000 if you are looking to buy a property. A higher down payment can reduce your total cost and may eliminate the need for mortgage insurance. A mortgage default insurance is required for down payments under 20%. 

• Debt service ratios: Your debt should fall within acceptable gross and total debt service ratio limits. These ratios help lenders assess whether your income can comfortably cover your housing costs and other debts. 

A mortgage specialist can help you determine what mortgage loan amount you may qualify for based on your income, credit, and property value. 

How does a first mortgage work? 

With a first mortgage, the borrower receives a lump sum to purchase a property or other purposes and repays it over time with interest, typically through monthly payments. These payments go toward both the interest and the principal, gradually reducing the loan balance. 

Most first mortgages come with either a fixed or variable interest rate. A fixed rate offers predictable payments over the term, while a variable rate can fluctuate based on market conditions. Depending on the lender, other options—like hybrid or open mortgages—may also be available. 

What does it mean to have a first mortgage? 

Having a first mortgage means that your lender holds the top priority on your property title. If you refinance, sell, or default, this mortgage must be paid off first. 

Since the first mortgage represents the largest claim on your home, it typically comes with the most favorable terms—like lower interest rates and longer repayment periods—making it the foundation of your overall home financing strategy. 

Can I have two mortgages at the same time?

Yes, it’s possible to have more than one mortgage. Your first mortgage is the primary loan, and if you later need more money, you might consider a second mortgage.

A second mortgage is usually taken out using the equity you’ve built in your home and can be used for purposes like debt consolidation, home renovations, or major life expenses.

While the first mortgage remains the primary lien on your home, the second mortgage sits behind it in priority. This means that if you default, the first mortgage gets repaid first, which makes second mortgages riskier for lenders—and typically more expensive for borrowers.

Still, they can be a flexible way to tap into the value of your home without refinancing your original loan. 

What are the differences between a first mortgage and a second mortgage?

A second mortgage is a loan taken out against the equity in your home, after a first mortgage is already in place. While both are secured by your property, they serve different purposes, come with varying levels of risk, and have separate repayment terms. 

Here’s how the two compare: 

Feature	First Mortgage	Second Mortgage
Lien Priority	Holds the primary lien on your property title; must be repaid first.	Holds a secondary lien; paid only after the first mortgage is settled.
Interest Rates	Typically offers lower interest rates because it’s less risky for lenders.	Often comes with higher interest rates than first mortgages, but lower than credit cards.
Purpose	Used primarily to purchase the property or refinance an existing mortgage.	Used to access home equity for expenses like renovations, debt, or investments.
Risk to Lender	Considered lower risk, especially with insured or high-ratio mortgages.	Potentially higher risk than first mortgages.

Refinancing your first mortgage 

Refinancing means replacing your first mortgage with a new one, often to get a better interest rate, lower monthly payments, or access home equity. 

You can consider refinancing if you want to increase your mortgage amount, extend the term to improve cash flow, or take advantage of better market conditions. Just keep in mind that penalties may apply for breaking your original mortgage early. 

Refinancing can also help you switch between a variable and fixed rate, consolidate mortgage debt, or adjust your repayment schedule to better align with your financial goals. 

First mortgage and loan-to-value (LTV) 

Your loan-to-value (LTV) ratio is the value of your mortgage in relation to your property’s value.  

Example: If your home is worth $400,000 and your mortgage is $320,000, your LTV is 80%. Most lenders in Canada prefer LTV to be 80% or lower for a conventional mortgage. If your LTV is above 80%, you’ll likely need to pay for mortgage insurance. 

Pros and cons of first mortgages 

Pros: 

Lower interest rates compared to other loans

First mortgages usually offer lower interest rates than unsecured loans, making them a more cost-effective way to borrow large sums.

Helps build equity over time

With each mortgage payment you make, you gradually pay down the principal and grow your home equity—an asset you can leverage later.

Long repayment terms reduce monthly costs

Spreading payments over 15, 20, or even 30 years makes monthly mortgage payments more manageable for most borrowers.

Improves credit over time with consistent payments

Making regular, on-time mortgage payments helps build a strong credit history, which can improve your credit score and financial reputation.

Cons:

Requires a large financial commitment

Taking on a mortgage means committing to years of consistent payments, which can impact your flexibility and spending power.

Missed payments can lead to foreclosure

If the borrower defaults, the lender has the right to repossess and sell the property to recover the outstanding mortgage debt.

Upfront costs

Getting a mortgage comes with additional costs like appraisals, legal services, and land transfer taxes that must be paid.

Is a second mortgage better than a first mortgage?

This depends on your financial goals and situation. A first mortgage is typically better suited for purchasing a home or consolidating debt, offering lower interest rates and longer repayment terms. In contrast, a second mortgage is often used to tap into your home’s equity, and while it can provide quick access to funds, it usually comes with higher interest rates than first mortgages. 

If you’re buying a property, a first mortgage could be the more cost-effective option. But if you already have a mortgage and need to borrow against the value you’ve built in your home—for things like renovations or debt consolidation—a second mortgage might be the right fit. 

What mortgage can I get with $70,000 salary in Canada? 

With a $70,000 annual salary, you might qualify for a first mortgage of approximately $300,000, considering a down payment of $50,000 and a mortgage interest rate of 5%. However, factors like your debts and credit are also important to note and keep track of. 

Lenders look at debt ratios and loan-to-value to determine what you can afford. Using a mortgage calculator can help estimate your potential mortgage amount and total cost. 

Get your first mortgage at Alpine Credits today 

At Alpine Credits, we offer home equity loans, which can be first mortgages, for homeowners looking to access the equity in their property. Whether purchasing a home or refinancing an existing mortgage, we provide flexible financing options to meet your needs. 

Unlike traditional lenders, we focus on the value of your home rather than just your credit score or income history, helping you secure financing even if you’ve faced challenges with other lenders. 

With Alpine Credits, you can borrow up to 75% of your home’s value. Here’s how it works: 

• Apply online – No lengthy forms or upfront credit checks. Just tell us about your home equity value. 

• Get approved – If you own at least 25% of your home, there’s a good chance you’ll qualify for a home equity loan. You can expect a response within just a few days—much quicker than most traditional lenders. 

• Access your funds – Use your loan for what matters most to you—whether that’s consolidating debt, investing in property, or covering major expenses. The choice is yours. 

Still have questions about first mortgages or second mortgages? Speak to a Financial Solutions Specialist at Alpine Credits for a free, no-obligation quote today.