Ontario Second & Private Mortgage Glossary

A

Amortization

The length of time over which a mortgage would be fully repaid if you kept making the same payments. Second and private mortgages are often interest-only, so amortization may not apply in the usual way.

Appraisal

An independent estimate of a property’s current market value, required by almost every second and private lender because their decision rests on the equity. Typically costs a few hundred dollars.

B

B lender

An alternative lender, more flexible than a bank on income documentation and credit, at a moderate premium. Often the lowest-cost step beyond a bank for a borrower who nearly qualifies.

Blanket mortgage

A single mortgage secured across two or more properties. Also called an inter-alia mortgage. Often used to buy before selling.

Bridge financing

Short-term funding (usually 6–24 months) that covers a gap — most often between buying a new property and selling the current one.

C

Closed mortgage

A term you cannot repay early without a penalty (or at all). Usually prices better than an open term but ties you in.

Combined loan-to-value (CLTV)

Every mortgage registered against a property added together, divided by the property’s value. The single biggest factor in second-mortgage pricing and limits.

Commercial mortgage

A mortgage on commercial or mixed-use property, assessed heavily on the property’s income and marketability.

Consumer proposal

A legal, binding arrangement to repay creditors a portion of unsecured debt, administered by a Licensed Insolvency Trustee. Does not cover your mortgage.

D

Discharge

Removing a mortgage from the property’s title once it is repaid. Carries a fee.

E

Equity

The difference between your home’s market value and everything owed against it. What second and private mortgages are assessed on.

Equity takeout (ETO)

Accessing built-up home equity as funds, through a second mortgage or refinance. Also just called a second mortgage.

Exit strategy

The dated plan for what repays or replaces a short-term mortgage before it matures. The most important part of any private or second mortgage.

F

First mortgage

The mortgage registered in first position, repaid before any other charge if the property is sold. A second mortgage sits behind it.

FSRA

The Financial Services Regulatory Authority of Ontario, which licenses and regulates mortgage brokers, agents and brokerages.

H

HELOC

A home equity line of credit — a revolving line you draw from as needed, rather than a lump sum. Available in first or second position.

I

Inter-alia mortgage

Another name for a blanket mortgage: one loan secured across more than one property.

Interest reserve

A portion of a mortgage advance held back to cover the payments, used to ease cash flow. It reduces the net funds you actually receive.

L

Lender fee

A fee charged by the lender to place a private or second mortgage, usually deducted from the advance rather than paid out of pocket.

Loan-to-value (LTV)

A single mortgage as a percentage of the property’s value. Second mortgages are commonly considered up to around 80% combined.

M

Maturity

The date a mortgage term ends, at which point it must be repaid or renewed. Renewal is not guaranteed.

MIC

A mortgage investment corporation — a pooled fund of investor capital that lends to published guidelines. A common source of second-mortgage funding.

N

Notice of Sale

The formal notice a lender must serve in Ontario before proceeding under power of sale. Starts the redemption period.

O

Open mortgage

A term you can repay early, in full or in part, without a full penalty. Useful when your exit timing is uncertain or soon.

P

Power of sale

The process by which an Ontario lender can sell a property to recover a defaulted mortgage, after serving notice and a redemption period.

Prepayment penalty

A charge for repaying a closed mortgage early. Second and private terms vary widely — always ask before committing.

Private lender

An individual, group of investors, or MIC that lends outside the banking system, assessing mainly on equity and property. Reached through a licensed broker.

R

Redemption period

The window — generally at least 35 days from the Notice of Sale in Ontario — in which a homeowner can bring the mortgage current and stop the sale.

Refinance

Replacing your existing first mortgage with a new, larger one. An alternative to a second mortgage, cheaper in some situations and dearer in others.

Registration

Recording a mortgage charge on the property’s title. Carries a fee.

Renewal

Extending a mortgage for a further term at maturity. Not guaranteed — a lender is under no obligation to renew.

Reverse mortgage

A mortgage for homeowners 55+ that provides tax-free funds with no monthly payments, repaid when you sell, move or pass away.

S

Second mortgage

A loan registered behind your first mortgage, secured against your equity, leaving the first mortgage in place.

Second position

Behind the first mortgage in priority. A second-position lender is repaid only after the first, which is why it costs more.

T

Term

The length of a mortgage agreement before it matures. Second and private terms are often short — 6 months to 2 years.

Third mortgage

A mortgage behind both a first and second, on remaining equity. Higher cost, niche, usually private.

V

Vendor take-back (VTB)

Financing provided by a property seller to the buyer, sometimes used alongside other mortgages.