Who orders this
- Homeowners borrowing against equity without breaking the first mortgage
- Brokers arranging second mortgages with alternative or private lenders
- Second-position lenders and MICs
- Lawyers registering a second charge
How lenders use the value in second position
If the home is sold after a default, a second mortgage lender is repaid only after the first, so its risk depends on the gap between the appraised value and everything owed ahead of it. Lenders look at combined loan-to-value: the first mortgage balance plus the new second, divided by the appraised value. A modest change in value can noticeably change the amount available.
- Avoiding a costly penalty for breaking a low-rate first mortgage
- Consolidating debt quickly
- Funding a business need or renovation
- Short-term borrowing while a sale is pending
Details the appraiser and lender will want
Keep the current first mortgage statement handy for your broker, and give the appraiser a list of improvements and any tenancy details. Second lenders are often private or alternative lenders with their own requirements on report format, inspection type and the appraiser’s designation. Name the lender when you order so the report is addressed to the party lending in second position, not to the first mortgage holder.
Frequently asked questions
Do I need an appraisal for a second mortgage across Canada?
Almost always. The second lender needs a current value to calculate combined loan-to-value and its exposure. An older appraisal done for your first mortgage lender is usually not enough, because it is out of date and addressed to someone else.
How much can I borrow with a second mortgage?
It depends on the appraised value, your first mortgage balance, the lender’s combined loan-to-value limit and your circumstances. Many second lenders cap combined borrowing well below the full value. Your broker can run the numbers once the appraisal is in.
Who should a second mortgage appraisal be addressed to?
To the lender advancing the second mortgage. If several lenders are being considered, wait until one is chosen, or ask whether the appraiser can provide a transfer letter later. Naming the right lender up front avoids paying for another report.
Is a second mortgage appraisal different from a first mortgage appraisal?
The inspection and valuation method are largely the same. The difference is the intended user and the lender’s requirements, which may be stricter in second position. The report still reflects market value as of the inspection date.