A second loan changes the whole picture
Include your first mortgage, any other secured debt, and the proposed second mortgage when calculating loan-to-value. Property value is an estimate until supported by the valuation the lender accepts.
Compare a second mortgage with refinancing
Keeping an existing first mortgage may be useful, especially when replacing it would involve a penalty or different terms. Refinancing into one mortgage is another option to examine. Compare total borrowing costs, payments, penalties, and the balance due at the same future date.
Questions to ask before signing
Ask for the full commitment and seek independent legal advice about the obligations.
- Is the first lender’s consent required?
- What is the net cash available after fees?
- Are payments interest-only or do they reduce principal?
- What are the term, renewal conditions, and payout costs?
- How will the second mortgage be repaid?
Look beyond the interest rate
Request an itemized explanation of lender fees, brokerage fees, appraisal, legal and registration costs. Ask which costs are paid separately and which reduce the cash you receive.
Compare the same loan amount, term, payment structure, and exit date. A smaller monthly payment can leave more debt to repay later.
Plan for the end before the beginning
A short term does not remove long-term obligations. Identify how you intend to repay the balance: a supportable refinance, property sale, or another documented source.
Check what happens if that plan is delayed. A renewal, a higher property value, or future bank approval should never be assumed.