When traditional banks close the door, private lenders can provide a temporary bridge. A private second mortgage in Ontario isn’t the cheapest financing option. In fact, it’s among the most expensive. But for homeowners with urgent needs or profiles that don’t fit the banks’ boxes, it can be the short-term answer to keep things moving until circumstances improve.
Ontario Housing Market and Debt Pressures
Ontario homeowners are under pressure from multiple angles:
- Ontario-wide average home price (July 2025): $822,356 (CREA)
- GTA average home price (June 2025): $1,101,691 (WOWA)
- Household credit market debt ratio (Q1 2025): 173.9% of disposable income (Statistics Canada)
- Debt service ratio (Q1 2025): 14.4% of disposable income going to interest + principal payments
In plain language: Canadians now owe nearly $1.74 in debt for every dollar of disposable income. On top of mortgage obligations, many households are struggling to keep up with credit cards and unsecured debt.
This is why some homeowners turn to a private second mortgage. Not because it’s the best option, but because it’s the only option available in the short term.
What Is a Private Second Mortgage?
A second mortgage is an additional loan secured against your property, on top of your first mortgage. Private second mortgages are funded by individuals, mortgage investment corporations (MICs), or private lending firms rather than banks or credit unions.
Unlike prime lenders, who focus heavily on credit score and income documentation, private lenders mainly care about your home’s equity and overall risk profile.
How Much Can You Borrow?
Let’s take a GTA home worth $1,101,691 with a $400,000 first mortgage.
| Scenario | Home Value | Existing Mortgage | Max Combined LTV | Max Second Mortgage Equity |
|---|---|---|---|---|
| Prime Lender (80%) | $1,101,691 | $400,000 | $881,352 | $481,352 |
| Private Lender (95%) | $1,101,691 | $400,000 | $1,046,606 | $646,606 |
| Flexible Case-by-Case (85%) | $1,101,691 | $400,000 | $936,437 | $536,437 |
The numbers show the draw: private lenders can unlock hundreds of thousands more in equity than banks will allow. But it comes at a cost.
Why Homeowners Use Private Second Mortgages
- Debt Consolidation – Paying down high-interest credit cards (19%+) with a secured loan, even if it’s more expensive than bank financing.
- Home Renovations – Funding improvements that increase value, helping you refinance into a cheaper product later.
- Bridge Financing – Covering the gap between selling and buying a home.
- Business or Investment Capital – Accessing liquidity when traditional lenders won’t.
Risks and Realities
Private second mortgages are short-term tools—not long-term solutions. Here’s why:
- Higher interest rates than bank lending
- Extra fees (lender, broker, legal, appraisal)
- Shorter terms—often 1–3 years
- Foreclosure risk if payments are missed
The strategy should always be:
- Use a private second mortgage only if you need to.
- Improve your financial profile (credit, income, debt load).
- Refinance into a B-lender or A-bank mortgage as soon as possible.
Who Benefits Most from Private Second Mortgages?
- Homeowners turned down by banks due to credit or income issues
- Self-employed borrowers without traditional proof of earnings
- Families under short-term financial strain who need breathing room
- Investors who require quick access to equity for opportunities
Conclusion
A private second mortgage in Ontario is not a perfect solution and it should never be treated as one. It’s expensive, it’s temporary, and it carries real risks. But for the right borrower, in the right situation, it can provide critical breathing space until your finances stabilize.
The key is the exit strategy: transitioning out of private money and into a B-lender or bank mortgage when circumstances improve.
Contact us today to see how much equity you could access, to build a plan that prioritizes both your immediate needs and your long-term financial health.
