4 Things You Need To Know When Getting Your Second Mortgage in Toronto

 June 29, 2021

By  BC Editorial Team

Getting a second mortgage in Toronto or in other areas can be stressful for some, and it can be argued that many people think ten times before getting one. But actually, you can look at a second mortgage as a form of investment in Toronto, and we’re going to discuss just why that is and what are the things you need to know:

What is an investment?

As per denotation, investment is the process of putting your money somewhere that generates money in return. Unlike just placing your money in the bank and earning an annual interest rate of less than 1%, investing allows you to get twice the money you invested over time.

One of the most common forms of investment is real estate property. It allows you to have money monthly simply by putting it for rent. And once the rent has already paid off the same amount you invested in purchasing the property, the continuous rent is left for you to save or spend however you please.

How did a second mortgage become an investment?

A second mortgage is a mortgage that has been purchased while another mortgage was made before it and is still in effect. For example, when you buy a house to live in and decide to get another house to open for rent, that house for rent is the second mortgage, and the original mortgage still in effect is the house you’re living in. In simpler terms, a second mortgage is a loan that you make in addition to your first mortgage.

With that in mind, a second mortgage can become an investment because if you put it out for rent, the money that you will be getting from it can be used to pay for its high interest rate. This is because the interest rate for a second mortgage is higher as compared to your first mortgage.

But, once this interest is completely paid, the money you’d be getting from the rent will be all yours and can be spent however you like—thus making it an investment. You are not doing anything, but you are earning something. So, if you want to make money work for you, consider getting a second mortgage.

Read more to know what you need to be aware of when getting a second mortgage in Toronto.

Things To Know Before And Upon Getting Your Second Mortgage In Toronto

Although having a source of income without doing anything about it sounds fancy, it is risky. Besides, all investments are accompanied by risks. No investment is risk-free. A risk-free investment is simply an investment that doesn’t offer any return at all.

Getting a second mortgage is risky because if you are tight on your budget, the first mortgage must be paid first by default. And in that case, it might be harder for you to pay it off and might not use it as an investment in that event. Thus, we suggest you get your second mortgage in Toronto once you have the financial security.

Here are other things you need to know:

  1.   They look at your income before allowing you to get a second mortgage.
    This is straightforward. Your income tells lenders about your capability of paying for your mortgages. So, the more your income is, the more chances you’d be approved of a second mortgage. Hence, we advise you that if you can, consider getting a side hustle that will offer you another source of income so that your net will be bigger. Because again, the bigger your income is, the bigger your chances of getting approved for a second mortgage.
  1.   Good credit score is a factor, too.
    If you want to get your second mortgage in Toronto, you must have a good credit score.

    A record of bad spending habits diminishes your qualification for a second mortgage. Of course, one of its requirements is a good or decent credit score. Some say you need to have 620, while others say you need 680. This differs in different places, but you should secure a credit score of at least 680 for better options.

    And if that does not apply to you, you may consult a brokerage because there are available second mortgages for people with bad credit scores. Because just like your income, it tells your capability of paying off the mortgages.

  1. It has a higher interest rate but a higher chance of ROI in the long run.
    As compared to your first mortgage, your second mortgage has a higher interest rate. But, if you compare it with other types of debt, a second mortgage is cheaper and more affordable. Thus, it is one of the many types of loans that people consider because of its availability. It is not cheap but not expensive, either. It is tolerable.

    Besides, it allows you to pay off other things that you have to pay for. For instance, a second mortgage gives you the chance to renovate your home without deducting the cost on your net income. Aside from that, you can use it to purchase a car if you intend to buy one because it not only makes your credit score better. It also enables you to afford any payments you have yet to meet.

  1.   A second mortgage is not for everyone.
    Although it is promising and enticing, it is not for everyone. Getting a second mortgage is not a decision taken lightly because of its financial and management responsibilities. Thus, you may think it’s ideal for you, but you would realize that it doesn’t work in the long run. That is why it is very important to know why you’re getting a second mortgage because there might be other options left for you to consider.


Getting your second mortgage in Toronto is not as easy as it may seem. It is promising and enticing, but it comes with risks that you should be willing to take and face upon getting one. But if you think you’re financially ready, there are benefits you can reap as well.

BC Editorial Team


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