Position is the order in which mortgages are registered against your home. A second sits behind your existing first, so lenders count both loans against the home's value, called combined loan-to-value, and usually price the second higher. A second can let you keep a good first mortgage, but compare it with refinancing before you choose.
When you borrow against your home, one of the first questions a private lender asks is which position the new mortgage will be in. It sounds technical, but it decides how much you can borrow, what it costs and what happens if things go wrong. Here is what it means in plain language.
Every mortgage is registered against the property on title, and its position generally follows the order of registration. The first mortgage is in first position, the next one registered is second, and the next is third. Position matters because of who is paid first if the property is ever sold to repay the debts. When the money is not enough for everyone, the lender in an earlier position is better protected than one behind it.
That is why a second mortgage is riskier for the lender, and why seconds usually cost more than firsts, in rate and in fees. The lender is taking more risk for the same property.
Lenders measure a mortgage against the value of the property, called loan-to-value. For a second, they look at combined loan-to-value: your existing first plus the new second, measured together against the home's value.
Here is an example. Your home is worth $900,000. You owe $450,000 on your first mortgage and want to borrow $100,000 more.
Across the lender programs we work with, the stated maximum loan-to-value is most often somewhere between about 65% and 80%, depending on the lender, the property and the position. At a 65% ceiling, the total could go up to $585,000, which leaves room for a second of up to $135,000. At 75%, the total could reach $675,000, leaving room for up to $225,000.
The value matters as much as the loan. If an appraisal comes in at $800,000 instead of $900,000, the same $550,000 is about 69%. At a 65% ceiling the total would be capped at $520,000, so the second could be no more than $70,000. Always ask what value the lender will use and who orders the appraisal.
You usually have two ways to get cash out.
A second mortgage sits behind your existing first, which stays as it is. This can make sense if your first has a rate or terms you want to keep, or if breaking it would cost a penalty. The trade-off is that the second is a separate loan, usually with a higher rate, fees and a short term.
A refinance replaces your existing first with one larger new first. You end up with a single mortgage, but it means paying out your current mortgage, which can bring a prepayment penalty, and your whole balance takes on the new rate.
Before you choose, look at your existing mortgage: its rate, how long is left on the term, what it would cost to break, and whether its terms limit adding another charge to the property. Then compare the options as a whole, not just the rate on the new money. We explain how the pieces fit in second mortgage vs HELOC vs refinance.
A third mortgage sits behind both the first and the second. It exists, but it is uncommon, and it is the most expensive of the three because the lender is last in line.
A lender in third position still has the same legal tools as any other. Under the Ontario Mortgages Act, a mortgagee can exercise the power of sale after default and the required notice, whatever position it holds. When a property is sold this way, the money is applied in a set order (section 27 of the Act): the costs of the sale, then the interest and principal owing on the mortgage being enforced, then the amounts owing to later mortgages in order of priority, and any remainder goes to the owner. The Act also recognises that a lender can sell subject to the rights of earlier mortgages, which means those earlier mortgages stay in the picture and have to be dealt with in the sale.
In practice this means a lender in a later position gets paid only if there is enough left, and that is why third position is priced and underwritten very conservatively. If you are already stretched across two mortgages, a third is usually a sign to look at other options first. For what the enforcement process looks like from the borrower's side, see what happens after a Power of Sale notice.
A licensed mortgage agent can compare a second with a refinance for your situation. If you want to start with the basics of private lending, see private lenders in Ontario: what to ask before you choose one.
Read the full breakdown of this solution, including eligibility and how to get started.
See Second Mortgages & Equity