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.

A second mortgage refers to an additional or secondary loan taken out on a property for which you already have a mortgage. Some advantages include the ability to access a large loan sum, better interest rates than a credit card and the ability to use the funds how you see fit. However, keep in mind interest rates are typically higher on a second mortgage versus refinancing and can add additional cash flow tension to your monthly bills. Talk to a mortgage professional today to determine if this is the best option for you!

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.

Some key things to note when looking at a second mortgage or refinancing:

• If you have a favorable interest rate on your first mortgage, a second mortgage allows you to keep the lower rate on your primary loan, resulting in a lower blended rate.
• Refinancing resets the amortization schedule, which could extend the loan term. A second mortgage leaves the existing term intact, helping you stay on track with your overall financial goals.
• Second mortgages often come with more flexible terms, such as interest-only payments, fully open, or shorter term, which can suit your immediate needs.

What are the advantages of a second mortgage?

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

• Homeowners can access a significant portion of their home equity (typically 80%-85% LTV).
• 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.
• Allows you to access your home equity without breaking your existing mortgage and incurring penalty fees.

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 reach out to me! 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.

Wall Street reacted positively to Trump’s initial tariff backpedalling, pushing US equity futures higher. This is a sign that he may pursue a less protectionist approach; for now, it is a boon for multinational companies that rely on cross-border commerce, giving them time to adjust pricing and mitigate any impact on profit margins.

The US dollar, however, slumped, albeit briefly. Canada’s dollar has traded markedly below the US dollar for years. And, although we promised to tighten our border restrictions, the US’s illegal immigration problems have little to do with Canada.

The Bank of Canada’s fourth-quarter consumer expectations survey reveals that despite recession concerns, 22.4% of respondents see a greater than 50% chance of moving to a new primary residence within the next year—up from 21.1% in the previous quarter.

Similarly, 13.5% of respondents plan to sell their home within the next year, up from 11.4% in Q3. The results also show increased interest from renters, with 19.9% considering a home purchase in the next 12 months, compared to 16.9% last quarter.

The Bank of Canada attributes the rise in homebuying intentions to expectations of further interest rate cuts in 2025.

“Survey results show that these home buying intentions are supported by consumers seeing and expecting easier credit conditions,” the report notes.

However, it also cautions that the timing of home purchases remains uncertain for many: “…those planning to buy a home over the next 12 months said they anticipate around a 50% probability of actually carrying through with those plans.”

The Q4 survey revealed that inflation expectations have primarily returned to historical norms. Consumers’ inflation expectations for food and gas stayed steady in the fourth quarter, while expectations for rent eased. However, they still anticipate rent will rise faster than pre-pandemic levels.

As a result of the improving inflation outlook, consumers expressed strong intentions to increase spending on essentials and housing over the next year. For the first time since 2021, they anticipate spending will outpace price increases.

While the new administration in Washington poses considerable uncertainty for the Canadian economy, the odds are that the Bank of Canada will successfully master a noninflationary rebound in economic activity in 2026.

There is an unprecedented disparity between the economic and financial situation in the US and Canada. The Canadian economy is far more interest-sensitive than the US and, therefore, slowed more dramatically in response to the Bank of Canada’s restrictive policy to bring inflation back to its 2% target level.

The jobless rate in Canada has reached 6.5%, well above the level in the US, and job vacancy rates have plummeted. Wage inflation has been sticky at 4.9% but will likely edge downward in response to excess supply in the labour market.

Inflation accelerated to 2% y/y in October, compared to the cycle-low 1.6% in September, mainly because gasoline price deflation slowed. The odds of another 50 bps rate cut by the central bank—on the heels of a jumbo cut in October—have diminished, but a 25 bps cut is in the bag.

Market-driven interest rates in Canada are well below those in the US, owing to weaker economic activity and lower inflation. US interest rates surged on the news of the Trump election victory. Ten-year US Treasury yields rose sharply to a post-election high of nearly 4.5% on the presumption that with a Republican majority in the House and the Senate, Trump will move ahead with tax cuts, tariffs and deregulation. Trump has also threatened to limit the independence of the Federal Reserve.

Canadian long-term yields have risen far less since the election. Short-term interest rates are also lower in Canada than in the US. The Bank of Canada has eased monetary policy four times for a total decline in the overnight policy rate of 175 bps, compared to only one rate cut of 50 bps by the Fed. This unprecedented divergence bodes well for a rebounding housing market in Canada.

Housing activity picked up in October and early November in response to the surge in new listings, giving potential buyers a broader range of choices and lower interest rates. The steepening yield curve portends more significant declines in variable mortgage rates—tied to the prime rate, which declines with every cut in the overnight rate, than fixed rates, which move with longer-term bond yields.

The Bank of Canada, concerned about a weakening Canadian economy, will continue to cut the overnight rate at every meeting between now and mid-2025. By then, the policy rate will be roughly 2.5%, half the level at the peak in BoC tightening. This will likely trigger a robust spring housing season.

There is plenty of pent-up activity in the Canadian housing market as buyers have waited for lower interest rates and home prices, and sellers have been reticent to list their properties, hoping for a housing recovery. This is beginning to turn around as every easing move by the Bank of Canada boosts economic activity, particularly in the interest-sensitive housing sector.