What Is A Second Mortgage & Is It Right For Me?

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Your home is a place to raise your family, create memories and feel comfortable. And while it’s all those things, it’s also equity and an asset in your financial portfolio. Life has a way of tossing a million curveballs at you and sometimes you just aren’t prepared for the financial undertaking that comes with it.

No matter what the reason, if you find yourself in need of extra money, a second mortgage can help you through any financial hardship you might be under. For those unfamiliar with the term, a second mortgage is a loan that lets you borrow against the value of your home. Because your home appreciates in value over time, you can use that extra value to take out a second mortgage, also known as a home equity line of credit. This way, you can obtain extra finances while still keeping your home.

Consulting a mortgage broker is a great place to start if you’re thinking about doing this, but I wanted to delve a little deeper into second mortgages before you decide to take the next step.

How It Works

Your second mortgage is a loan you get from lending institutions such as banks. The second mortgage uses your home as collateral and may carry higher interest rates than your first mortgage. If you’re thinking about a second mortgage, use this mortgage calculator to figure out the numbers.


It’s important to understand the risks if you choose to go forward with a second mortgage. If you start falling behind on your payments, the lender can foreclose on your home. A second mortgage means a secondary lien on your house, so in the event of a foreclosure, proceeds from the sale of your home would cover the first mortgage, with the remainder being used to pay off the second mortgage. It is very important to make payments to both your mortgages on time.


A great thing about obtaining a second mortgage is that you’ll come into a lot of money in a short period of time. If you need to pay for any emergency scenarios or want to purchase a cottage, you can use the funds for whatever you want. Make sure you discuss what you plan to do with your mortgage broker first to see if this is the right move for you.

Long-Term Effects

Before you do anything, make sure you look at your current financial situation and consider what could happen as a result of you taking out a second mortgage. It is incredibly important to budget what you are planning to do with the money. If you are trying to take advantage of low-interest mortgage rates to pay off debt with higher rates, you may think it’s easier to pay off debt such as credit card debt, but you may end up amassing more.

If you’re thinking about a second mortgage or want more information, feel free to contact me. I’ll be happy to answer all your mortgage-related questions.

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