Second mortgages, a working guide to priority, who lends, and what the file needs.

A second mortgage is a separate loan secured against a property that already has a first mortgage registered on title, and it's registered behind that first mortgage in priority. If the property is sold, or if a lender exercises a power of sale, the first mortgage is paid out in full before the second-position lender recovers anything from what remains.

That priority position is the entire reason seconds are priced and underwritten differently from firsts — the second lender is carrying more risk for the same property, and the file has to reflect that.

It also means a second mortgage lender cares intensely about what happens to the first mortgage over the life of the second. A borrower who falls behind on the first, even if the second is being paid on time, puts the second lender's entire position at risk, since a power of sale triggered by the first lender doesn't wait for the second lender's consent. That's part of why second-mortgage underwriting looks so closely at the borrower's overall payment history, not just the specific loan being placed.

Most second-mortgage commitments also include a covenant requiring the borrower to keep the first mortgage in good standing, and some give the second lender the right to step in and cure a default on the first to protect its own position, then add that cost to the second mortgage balance. It's a detail worth walking a client through before they sign, since it's not something most borrowers expect from a loan that, on paper, only touches the equity above the first mortgage.

• →Mortgage investment corporations, which fund seconds as a routine part of a diversified mortgage portfolio — see what a mortgage investment corporation actually is.
• →Individual private lenders, whose appetite and terms vary investor to investor.
• →Some B lenders, selectively, when the file and equity position fit their policy.
• →Banks and credit unions rarely place a standalone second mortgage; where a client wants to access equity through a first-position lender, a home equity line of credit is the more common route, which functions differently from a private second.

Speed is usually the deciding factor in which of these a broker approaches first. A MIC with an established relationship and a standard process can often turn a straightforward second around faster than sourcing an individual private lender cold, even though an individual investor can occasionally beat both on price or flexibility for the right file. Knowing which lenders in a broker's network are actually active on seconds right now, rather than working from an outdated mental list, saves real time on a file where time is usually the whole point.

The reason for the request matters too, and not just for the purpose-of-funds narrative required later in the file. A second being used to consolidate high-interest debt is a materially different risk story than one funding a renovation that will add value back to the property, or one bridging a short gap ahead of a known, dated event like a bonus payment or the sale of another asset — and most private lenders price and underwrite these purposes differently, even at similar loan amounts and LTV.

OSFI's Guideline B-20 applies only to federally regulated financial institutions, so it doesn't set a combined-LTV ceiling for private lenders the way it shapes underwriting for an insured first mortgage. That means there is no single national combined-LTV figure to quote a client — each private lender sets its own ceiling, and the commonly quoted ranges across the industry vary meaningfully by property, location, and the specific lender's risk appetite.

Property type and location do a lot of the work behind whatever ceiling a given lender quotes. A well-located, conventional single-family property in a strong market typically supports a higher combined-LTV appetite than a rural or unique property, purely because the lender's exit — a resale in the event of default — is more certain and faster on the former. That's worth explaining to a client whose expectations are anchored to a figure a friend or forum post quoted for a different property entirely.

It's also worth flagging that combined-LTV is only one part of a private lender's decision, not the whole of it. A file with strong equity but a weak, unexplained purpose-of-funds narrative can still be a harder placement than a file with somewhat thinner equity and a clean, credible story — equity-based underwriting doesn't mean the borrower's situation is irrelevant, only that it carries less weight than it would at a bank.

A broker quoting a client on a second should also be candid that the combined-LTV figure moves the moment the first mortgage balance changes materially — through a large lump-sum prepayment, a renewal onto a different amortization, or simply enough time passing on an amortizing first. Re-confirming the current first-mortgage balance close to the second's funding date, rather than relying on a figure pulled weeks earlier, avoids a late surprise on the equity math.

Where a first mortgage carries a prepayment penalty and the client's real goal is simply to access more cash, it's worth running the comparison against a full refinance of the first mortgage as well, not assuming a second is automatically the cheaper route. A second avoids disturbing a favourably priced first mortgage, but that advantage can be outweighed if the second's rate and fees, stacked on top of the first mortgage's existing payment, end up costing more than simply refinancing the whole balance would have.

1. 01A current payout statement or balance confirmation on the existing first mortgage, since the second lender's equity math starts there.
2. 02An up-to-date property valuation, since combined-LTV limits are set against current value, not the value at the time of the first mortgage.
3. 03A title search confirming what else, if anything, is already registered against the property.
4. 04A clear purpose-of-funds narrative — what the money is actually for, and how it fits the client's broader financial picture.
5. 05A realistic exit plan, since most seconds are shorter-term products; see private mortgage exit strategies for how to build one that a lender will actually accept.