Published: January 9th, 2026 • Last Updated: January 9th, 2026
Author: Ross Taylor on AskRoss.ca

Use a Second Mortgage to Pay Off Credit Cards, Preserve Your Rate, and Regain Control

If your mortgage isn’t up for renewal until 2026 or 2027, you might think it’s too early to start planning. But in reality, January has become peak season for second mortgages in Canada, and for good reason.

I recently spoke about this in a Canadian Mortgage Trends article,Why January Is Peak Season for Second Mortgages in Canada, where I break down why more Canadians are using second mortgages as a financial strategy, not a last resort.

This growing trend isn’t just about accessing quick cash. For many homeowners, it’s about:

• Getting ahead of rising interest rates
• Preserving low-rate first mortgages
• Consolidating high-interest debt
• Funding urgent expenses without triggering penalties or disrupting their current mortgage terms.

If you’re equity-rich but facing financial pressure, or simply planning ahead, a second mortgage could be a smart move. Here’s what you need to know.

Jump to a specific section in this article ↓↓

• What is a second mortgage, and how does it work?
• Why are second mortgages becoming more popular in 2026?
• What does a second mortgage actually do, and how does it help you keep your low rate?
• Should you consider a second mortgage before your renewal?
• What are the pros and cons of second mortgages in 2026?
• Why January is the right time to explore this option
• What are the problems second mortgages can help solve?
• What is the role of private lending in second mortgages?
• Advice from Ross Taylor Mortgages: Second mortgages before renewal
• List of all FAQs: Second Mortgages Before Renewal

What is a second mortgage, and how does it work?

Understanding this simple concept could save you thousands.

A second mortgage lets you borrow against your home’s equity without breaking your first mortgage. That means you don’t lose your current rate, and you don’t trigger penalties. Instead, you’re taking on an additional loan secured against your property.

The two types of second mortgages

• Home equity loan: A lump sum loan with a fixed rate and repayment term
• HELOC (home equity line of credit): A revolving line of credit with variable interest and flexible borrowing

In many cases, especially when the banks say no, a private second mortgage offers faster access, easier qualification, and fewer hoops to jump through, though usually at a higher rate.

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Why are second mortgages becoming more popular in 2026?

More Canadians are leveraging home equity before renewal pressure hits.

In my practice, I’m seeing a big shift. Second mortgages were once seen as something for people in trouble. Today, they’re often used proactively, to maintain control, cover rising costs, or get ahead of a tough renewal situation.

What’s behind the second mortgage surge?

• Rate lock-ins are ending: Renewals in 2026–2027 could mean doubling your current interest rate.
• Living costs and credit card debt are exploding: With credit card rates over 20%, second mortgages at 7–12% are a lifeline.
• Canadians have more equity than cash: Home values have held strong, but liquidity hasn’t kept up.
• Private lenders are stepping up: Tighter bank rules mean more borrowers are turning to private second mortgage solutions.
• January is the “planning month”: It’s when people review finances and make major money decisions, especially if their mortgage is renewing within 24 months.

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What does a second mortgage actually do, and how does it help you keep your low rate?

This is where a lot of homeowners get tripped up, so let’s break it down clearly.

A second mortgage is a new loan that’s registered behind your existing first mortgage. It doesn’t replace your original mortgage, and it doesn’t change your rate or terms.

Instead, it sits in second position on the title, and that’s important because it affects both the rate and the risk for the lender.

Because second-position lenders are behind the bank on title (meaning they get paid out second if anything goes sideways), they charge higher rates than first mortgages.

Think 7–12%, depending on the lender, plus fees. Yes, it’s more expensive, but it’s also temporary and strategic.

So why would you do this?

Simple, the goal is to preserve the low rate on your current mortgage.

Example: Let’s say you locked in at 2.79% in 2021

If you break that mortgage today to access equity, you’re not just triggering a prepayment penalty. You’re also refinancing the whole balance at today’s 6–7% rates. That’s a double whammy.

A second mortgage, on the other hand, lets you borrow the extra money you need, without touching that original low-rate mortgage. You keep paying 2.79% on the bulk of your loan and only pay the higher rate on the new second mortgage portion.

That’s the strategy. You’re preserving your rate by keeping the first mortgage in place and isolating the new borrowing at a separate rate.

When does this approach make sense?

Here’s when I usually see this strategy used:

• Breaking your current mortgage would trigger a large penalty that makes refinancing unattractive.
• When you don’t qualify for a full refinance with a bank or A-lender, but you do have enough equity to support a smaller second mortgage with a private lender
• When you only need funds for a short period, and you have a clear plan to repay or refinance before your main mortgage renews

Now, here’s where we can really help you run the numbers. If you tell us your current mortgage balance, rate, remaining term, and how much extra you need, we can calculate your effective blended cost and figure out if a second mortgage makes sense, or if refinancing might actually be cheaper in the long run.

This is where strategy matters more than guesswork. Let’s make sure you’re choosing the path that saves you the most money, not just the one that seems easiest upfront.

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Should you consider a second mortgage before your renewal?

When you want to keep your low-rate mortgage but still need access to funds.

Let’s say your current mortgage is at 2.89% and up for renewal in late 2026. If you refinance today to access equity, you could be locking in a new rate above 6% on the entire mortgage balance.

A second mortgage lets you avoid that.

It keeps your original mortgage untouched while giving you access to your home equity for urgent needs like debt consolidation, business capital, or home renovations.

This approach is especially valuable when your first mortgage rate is much lower than current market rates. And with second mortgage terms usually running 12 months, you’ve got flexibility to reassess closer to your renewal.

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What are the pros and cons of second mortgages in 2026?

No financial product is perfect. What matters is whether it fits your strategy.

A second mortgage should never be a knee-jerk decision. But in the right situation, it’s a powerful tool. Here’s what to weigh:

Benefits of a second mortgage

• Preserve your first mortgage rate: Avoid breaking terms and paying penalties.
• Consolidate high-interest debt: Replace 20%+ credit cards with 7–12% second mortgage rates.
• Access equity quickly: Some approvals happen in 3–5 days.
• Flexible qualification: Credit-challenged or self-employed borrowers can still qualify.
• Short-term solution: Most second mortgages are 6–12 months, with renewal options.

Risks and trade-offs to watch for

• Higher rates than your first mortgage: But still lower than most unsecured options.
• Closing costs apply: Legal, appraisal, broker and lender fees can add up.
• Monthly payment burden: You’re taking on an additional obligation.
• Foreclosure risk: Like your main mortgage, your home is collateral.

The key is understanding the total cost, including fees, interest, and repayment schedule, and having a plan to manage it.

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Why January is the right time to explore this option

January isn’t just about resolutions. It’s about preparation.

Here’s why this month matters:

• It’s the financial reset moment: Canadians are reviewing their budgets and setting goals.
• Lenders are aggressive early in the year: Many want to get deals done in Q1.
• The lead time matters: Starting now gives you time to assess, apply, and plan exit strategies before your renewal date arrives.
• Inventory is limited: Waiting until your mortgage is 60–90 days from renewal might leave you scrambling or settling for a worse deal.

A second mortgage isn’t something to rush into. But January is when smart borrowers start the conversation.

Thinking a second mortgage could be right for your New Year’s money goals? Let’s crunch the numbers and make January work for you.

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What are the problems second mortgages can help solve?

Second mortgages aren’t about indulgence. They’re about solutions.

Here’s where I see second mortgages making a real difference for Canadian families:

Common use cases

• Credit card and loan consolidation
• Paying off CRA tax debt
• Bridge financing before selling
• Helping family with down payments
• Investing in a business or side hustle
• Making urgent home repairs or renovations

If your situation is temporary but your need is immediate, a second mortgage could be the bridge that gets you to renewal without unnecessary financial strain.

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The role of private lending in second mortgages

Banks are saying “no” more often, but that’s not the end of the road.

Private lenders play a huge role in this market now. And they’re not just for people with bad credit. In fact, many of my clients who use second mortgages through private lenders are responsible borrowers, self-employed, new to Canada, or don’t meet the strict stress-test guidelines.

What’s changed is that private lending is now mainstream, not a last resort. But like I said in my article onwhy private mortgages are on the rise in Canada, working with the right mortgage broker matters.

Not all lenders play fair. You need someone who can explain the terms, map out the exit, and protect your long-term financial health.

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Advice from Ross Taylor Mortgages: Second mortgages before renewal

If your mortgage comes up for renewal in 2026 or 2027 and you’re juggling high-interest debt or short-term cash needs, a second mortgage could be a smart way to unlock equity without touching your existing terms.

If you’re exploring a second mortgage, I want you to ask yourself:

• Do I want to preserve a low first mortgage rate for as long as I can?
• Am I facing urgent cash flow needs that won’t wait for my renewal?
• Is my credit or income profile keeping me from accessing funds through traditional lenders?
• Do I have a clear plan for paying off or replacing the second mortgage by renewal?

If you answered yes to most of those questions, then a second mortgage might be your best next step.

Let’s talk about your situation. My team will walk you through the numbers, compare them to refinancing or HELOC options, and help you build a strategy that makes sense for your timeline, not the bank’s.

January might just be the smartest time of the year to think about this move, before renewal pressure hits and your options narrow.

We’re ready when you are.

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List of all FAQs: Second Mortgages Before Renewal

Should you consider a second mortgage before your mortgage renews?

• It allows you to access equity without refinancing your entire mortgage at a higher rate.

What are the benefits of a second mortgage?

• You can preserve your first mortgage rate, consolidate high-interest debt, and qualify more easily with flexible lenders.

What are the risks of a second mortgage?

• Higher rates than a first mortgage, added fees, and the risk of foreclosure if payments are missed.

How does a second mortgage work?

• It’s an additional loan secured by your home equity, separate from your primary mortgage.

What types of second mortgages are available?

• Home equity loans (lump sum) and HELOCs (revolving line of credit).

Why is January a good time to consider a second mortgage?

• Lenders are active, borrowers are budgeting, and it gives you time to plan well before renewal.

How quickly can you get a second mortgage approved?

• Some private lenders can approve in 3–5 days.

Who typically uses second mortgages today?

• Equity-rich homeowners, especially those planning ahead for renewal or managing short-term cash flow needs.

How does private lending play a role in second mortgages?

• Private lenders offer flexible, faster financing when banks say no, especially for self-employed or credit-challenged borrowers.

Is a second mortgage better than refinancing before your term ends?

• It can be, since it avoids penalties and preserves your lower rate on the first mortgage.

What fees are involved in getting a second mortgage?

• Closing costs like legal, appraisal, broker, and lender fees.

Is private lending safe?

• Yes, if you work with a reputable mortgage broker who explains terms and maps out an exit plan.

How long does a second mortgage typically last?

• Most second mortgages are 6–12 months, with options to renew if needed.

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