The phrase "second mortgage" covers three very different lender categories. Choosing between them changes your rate by up to 5%, your fees by up to 3%, and your closing speed by up to four weeks. The Three Lender Categories Category Examples Rate range Fees A-lenders Banks, credit unions, monoline 6.49%–8.49% $0 lender fee B-lenders Equitable, Home Trust, MCAP 8.49%–10.99% 0–1% Private MICs and individual investors 9.99%–12.99% 1–3% When Institutional Wins Credit score 620+ Full income documentation (T4s, NOAs) Closing date 3+ weeks out Property is residential, urban, owner-occupied Long-term hold (3–5 year term acceptable) Institutional second mortgages amortize over 25–30 years, so the monthly payment is often half what a private lender would charge for the same loan amount. When Private Wins Credit score under 580 or active credit issues Self-employed with limited paper trail Need to close in under 7 business days Bridge financing while a sale closes Property is rural, mixed-use, or uniquely zoned 12-month exit plan to refinance back to A or B Private deals are typically interest-only with a 1- or 2-year term and a balloon payment at maturity. The Real Cost Difference $100,000 second mortgage, 12-month hold: Lender Rate Lender fee Total interest + fees Credit union 7.49% $0 $7,480 B-lender 9.49% $1,000 $10,475 MIC 10.49% $2,000 $12,485 Private 11.99% $3,000 $14,975 The gap shrinks fast on shorter holds. For a 6-month bridge to a refinance, the absolute dollar difference between B and private is often under $2,000 — sometimes worth paying for the speed. Speed to Funding Lender type Typical close Credit union 3–4 weeks Bank/A-lender 2–4 weeks B-lender 7–14 business days MIC 5–10 business days Private individual 3–5 business days Red Flags in Private Lending Watch for any of the following — all are signs of a predatory lender: Lender fees over 4% Compounded interest more frequent than monthly Prepayment lock-out for the entire term Balloon penalties that exceed 3 months interest Lender insists on a specific lawyer A reputable broker will steer you away from these terms or use them only as a last resort with full disclosure. Choosing Through a Broker Always source private and B-lender deals through a licensed broker. Brokers have access to MICs and private investor networks that do not advertise to the public, and the broker is paid by the lender — not by you on most deals. See the full second mortgage pillar guide Ready to Get Started? Contact us today for personalized mortgage advice and competitive rates. Get Pre-Approved Call (416) 822-7357 Frequently Asked Questions Are private second mortgages safe? Yes when sourced through a licensed broker. The mortgage is registered on title and governed by provincial mortgage law. The risk is in the rate and fees, not the legal structure. Can I switch from private to institutional later? Yes — that is the standard exit plan. 12 months of on-time payments + a credit rebuild typically qualifies for a B or A refinance. Do private lenders pull credit? Most do, but the score weighs less than equity and exit strategy.
