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Difference Between Second Mortgage and Refinance

One of my jobs as a Burlington mortgage broker is to help my clients with refinancing. Quite often, the question comes up regarding the differences between getting a second mortgage and refinancing, and which option is best. Many don’t realize that they are not entirely the same thing and each one has its benefits depending on your situation.

Clients choose to refinance for several reasons, such as debt consolidation, to lower monthly payments, have money for home improvements, due to illness or unseen circumstances, or a need to tap into their home’s equity for any number of reasons. So what is the difference between refinancing and taking out a second mortgage, and which should you choose?

Taking Out a Second Mortgage vs. Refinancing

The main difference between refinancing and a second mortgage is that, with refinancing you are taking your 1st mortgage and making changes. With a second mortgage, you are taking out a completely new mortgage than the 1st one.

Second Mortgages 

For a start, a second mortgage takes a backseat to your original mortgage. This means that your original lender has precedence over your new lender. The process of getting a second mortgage is the same as when you got your 1st mortgage. You will need to complete all of the paperwork and provide your financial and personal details, have your home appraised, and pay fees. Since it’s a new loan, there will be loan origination fees, closing costs, and appraisal fees.

In Canada, the process of obtaining a second mortgage is actually much smoother than when getting a first mortgage or refinancing your mortgage. This is because there are no income confirmation, no credit minimums, no FCSO audit or bank account requirements to meet. In fact, a second mortgage doesn’t even require making a second set of payments if it is set up properly! The right mortgage professional can capitalize (add) the payments into the new mortgage, avoiding any payments being made for the term.


Like a second mortgage, you will be getting a completely new mortgage on your home. However, you are taking the existing mortgage and rolling this into the new one, so you will only have one payment to make a month. Many choose to refinance to get a lower interest rate and monthly payments.

You will still need to go through the same process that you did when you first took your mortgage out. Refinancing is less risky to lenders because you are essentially paying off the old mortgage to create the new one.

Whether you choose to refinance or take out a second mortgage will depend on your financial situation. Needs, and things like interest rates. It’s best to look at all of the pros and cons for each to see which would be more beneficial to you.

If you are thinking about refinancing or taking out a second mortgage, give our Burlington mortgage broker team a call today to see which is right for you!

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