Second Mortgages: What You Need to Know.

General Kristin Woolard 27 Jan

Second Mortgages: What You Need to Know.

One of the biggest benefits to purchasing your own home is the ability to build equity in your property. This equity can come in handy down the line for refinancing, renovations, or taking out additional loans – such as a second mortgage.

What is a second mortgage?

First things first, a second mortgage refers to an additional or secondary loan taken out on a property for which you already have a mortgage. This is not the same as purchasing a second home or property and taking out a separate mortgage for that. A second mortgage is a very different product from a traditional mortgage as you are using your existing home equity to qualify for the loan and put up in case of default. Similar to a traditional mortgage, a second mortgage will also come with its own interest rate, monthly payments, set terms, closing costs and more.

Second mortgages versus refinancing

As both refinancing your existing mortgage and taking out a second mortgage can take advantage of existing home equity, it is a good idea to look at the differences between them. Firstly, a refinance is typically only done when you’re at the end of your current mortgage term so as to avoid any penalties with refinancing the mortgage.

The purpose of refinancing is often to take advantage of a lower interest rate, change your mortgage terms or, in some cases, borrow against your home equity.

When you get a second mortgage, you are able to borrow a lump sum against the equity in your current home and can use that money for whatever purpose you see fit. You can even choose to borrow in installments through a credit line and refinance your second mortgage in the future.

What are the advantages of a second mortgage?

There are several advantages when it comes to taking out a second mortgage, including:

  • The ability to access a large loan sum (in some cases, up to 90% of your home equity) which is more than you can typically borrow on other traditional loans.
  • Better interest rate than a credit card as they are a ‘secured’ form of debt.
  • You can use the money however you see fit without any caveats.

What are the disadvantages of a second mortgage?

As always, when it comes to taking out an additional loan, there are a few things to consider:

  • Interest rates tend to be higher on a second mortgage than refinancing your mortgage.
  • Additional financial pressure from carrying a second loan and another set of monthly bills.

Before looking into any additional loans, such as a secondary mortgage (or even refinancing), be sure to speak to your DLC Mortgage Expert! Regardless of why you are considering a second mortgage, it is a good idea to get a review of your current financial situation and determine if this is the best solution before proceeding.


  • Written by my DLC marketing team

Construction and Pre-Construction Mortgages.

General Kristin Woolard 20 Jan

Construction and Pre-Construction Mortgages.

Building or renovating your own home is such an exciting time and allows you to create something tailored to you and your family!  But when it comes to construction mortgages, there are a few different types of loans: new construction and even pre-construction.  Let’s break it down so you can determine the best choices for you.

Construction Mortgage

Construction mortgages service both new builds and large home renovations. The purpose of a construction mortgage is to advance you the full funds for your mortgage in stages as outlined below.

These stages align with the construction process of your home (or through major renovations if you are doing an upgrade) and inspectors are required at each stage to confirm the current construction and allow for advancement of the next set of funds.

Draw Stage Required Completion Construction Stage % of Total Mortgage Advanced
1st Draw (Optional) 15% complete Excavation and foundation complete. You can also use this first draw to purchase land. 15%
2nd Draw 40% complete Roof is on, the building is weather-protected (i.e. airtight, access secured) 25%
3rd Draw 65% complete Plumbing and wiring is started, plaster/ drywall is complete, furnace installed, exterior wall cladding complete, etc. 25%
4th Draw 85% complete Kitchen cupboards installed, bathroom completed, doors have been hung, etc. 20%
5th Draw 100% complete Ready for occupancy with seasonal and exterior work completed 15%

In addition to the difference in receiving funds from a construction mortgage versus a traditional mortgage, there are a few other key differences:

  1. Home construction loans are short-term agreements with generally one-year in length while mortgages have varying terms and range anywhere from 5 to 30 years in length.
  2. Most construction loans will not penalize you for early repayment of the balance, unlike traditional mortgages which can have pre-payment penalties if not part of your agreement.
  3. Monthly payments are interest-only until the end of construction.
  4. Construction loans only charge interest on the amount of the loan used during the construction. The borrower does not have to pay interest on any unused portions. Traditional mortgages require the borrower pays interest on the entire amount of the loan.
  5. Construction loans can provide upfront funds to purchase land for your build, while traditional mortgages typically do not service land-only purchases.
  6. Any remaining costs of construction can be paid down by acquiring a mortgage on the home once it’s completed.

Note: If you are choosing to do a self-build, you will need to prove that you have enough experience to properly handle the construction from start to finish.

Keep in mind that, similar to traditional mortgages, construction loans have varying rates and terms depending on the type of property you’re building, the amount of construction and length of the construction.

Pre-Construction Mortgage

Somewhat different from a construction mortgage is a “pre-construction” mortgage. These typically apply to condominiums, townhouses and other new builds. When it comes to pre-construction condo purchases, mortgage approval is required as this tells the developer that you have the ability to finalize on the unit later.

Typically, mortgage pre-approval is required within 30-90 days of purchase but you can get mortgages as early as 2-3 years from when the project is due to be completed. In these cases, you may not necessarily be able to get a rate guarantee due to the timeframe but it is worth asking for a commitment letter if you’re seeking a mortgage closer to the final build.

Similarly with traditional mortgages, your ability to get approval for a pre-construction mortgage is determined by your credit score, income-to-debt ratio and your employment history.

Closing happens once the building has been registered and when you receive the title to your unit. However, with a pre-construction mortgage, your payments will start with the builder occupancy fees from the time of occupancy to final closing, which can be a period of 3-6 months depending on the project.

If you are looking to purchase a new build or are interesting in building your own home or renovating your current one, please be sure to reach out to your Dominion Lending Centres mortgage expert and discuss your options to ensure you’re getting the best construction loan for your project.


  • Written by my DLC marketing team

Early Inheritance

General Kristin Woolard 13 Jan

Early Inheritance

Everyone knows that Canada’s real estate market has seen record appreciation over the past several years. Homeowners who have been paying down their mortgage while their value has been going up are likely sitting on a large chunk of equity.

I often find myself in conversation with people who are astonished that any First Time Homebuyers are able to get into the market at all these days. With the down payment requirements it can take years of savings to bank the minimum 5% down. And by the time it is gathered young buyers could be priced out of the market.

Then there is the Stress Test that forces buyers to qualify as if their interest rate was 2.00% higher than their actual rate. It sometimes seems impossible for young people to own a home of their own.

There is an ever-increasing trend in Canada where owners sitting on large amounts of equity are tapping into it to provide a larger down payment to their adult children – kind of like giving them an early inheritance.

But with many of these older Canadians in retirement with lower incomes than they had in their working days how do they qualify under the Stress Test? They may not want to sell their home to help their children.

There is an option for owners who are 55+ that many have not considered. With a Reverse Mortgage there is no need to qualify under the Stress Test. Borrowers can access up to 55% of their home’s value for any purpose and there is no need to repay the loan until the home is sold or the borrower(s) pass away.

Interest rates are higher than traditional mortgages so it is recommended that you get a demonstration of how much interest would accumulate in the estimated time before selling and down-sizing. But if the money is used to get your loved ones into a home of their own so they can start gathering equity too, it could be well worth it!

There are only 3 institutions in Canada that provide Reverse Mortgages so ask your mortgage professional which would be the best option for you if this is something you are considering.


  • Written by Kristin Woolard

Selling Your Home in Winter.

General Kristin Woolard 5 Jan

Selling Your Home in Winter.

While you might think selling your home in winter is harder, with the right considerations it doesn’t have to be! When selling your home during warmer months, the focus is typically on curb appeal and gardening, as well as having bright colors and patterns to draw out different rooms.

While curb appeal should not be forgotten in winter months, the focus should be centered on creating a warm, comfortable and welcoming space. You can do this through the following:

  1. Curb Appeal – If you live in an area that receives high amounts of snow, be diligent about keeping your sidewalk and driveways clear for visitors, and to keep your home looking clean for viewing. Always make sure to sweep any fallen leaves or debris.
  2. Keep it Cozy – Ensuring your home is sufficiently heated during showings will also go a long way to making it feel more comfortable; a steady 20 to 22 degrees Celsius during showings is ideal.
  3. Light and Inviting – With days being shorter and darker during winter, ensuring your home is light and inviting can make a big difference. In some cases, you may consider repainting the walls before listing your property.
  4. Declutter – When selling, it is important to declutter your home so that it looks its best and gives room for people to imagine their own belongings in your space.
  5. Define Property Boundaries – If you are showing your home in the middle of snow season, be sure to mark the four corners of your property so that potential buyers can see exactly what they are getting.

While there is some extra work with selling your home in the winter due to the weather conditions, it can pay off! Buyers tend to be highly motivated and often there is less competition for sales during this time giving more focus to your home.


  • Written by my DLC Marketing Team