Short answer: A private second mortgage is a second loan registered against your home, behind the first mortgage you already have. Your first-mortgage rate and term can stay in place, and you keep making those payments while you also pay the second mortgage (FCAC, Borrowing against home equity). That can suit Alberta homeowners who need to use some equity but do not want to break a first mortgage they are happy with. The trade-offs are real: a second mortgage usually costs more than a first mortgage, private loans also tend to carry lender and broker fees and short terms, and your home secures both loans. Compare a HELOC, a refinance (including any prepayment penalty) and blend-and-extend before you sign, and have a realistic exit plan.
What a private second mortgage is
The Financial Consumer Agency of Canada (FCAC) describes a second mortgage as a second loan on your home. You have to keep paying the first mortgage as well. Interest rates on second mortgages are usually higher than on first mortgages because they are riskier for lenders: if the home had to be sold after a default, the first mortgage is paid first.
A private second mortgage is that same second ranking, but the lender is not a bank or credit union. Private lenders may look mainly at the property and your equity when a regular lender has said no, or when timing is tight, which is also why these loans usually cost more. This article is about a private loan in second position so the first mortgage can stay put; see also private mortgages in Alberta.
Why someone in Alberta might consider one
Some homeowners in Calgary, Edmonton, Red Deer and smaller communities have a first-mortgage rate they would rather not give up. Refinancing can mean a new rate on the entire balance, plus a possible prepayment penalty. A second mortgage leaves the first loan as it is and borrows only against remaining equity. It can also come up when a regular lender will not approve a HELOC or a refinance. That does not mean a private second mortgage will be approved, or that it will cost less once fees and the shorter term are counted. For context on posted figures, see current mortgage rates in Alberta.
The trade-offs: cost, fees and term
- It usually costs more than a first mortgage. The FCAC notes that second-mortgage rates are generally higher than first-mortgage rates.
- Lender and broker fees sit on top of the appraisal, legal and title costs the FCAC lists for borrowing against equity. Compare the total cost, not just the interest rate, and get every fee in writing before you commit.
- Terms are typically short. Ontario's mortgage regulator, the Financial Services Regulatory Authority of Ontario (FSRA), describes private mortgages as a temporary option, often for one or two years (FSRA, Private mortgages). At the end of the term you generally need to pay the loan off, refinance or renew. Do not assume a renewal will be offered on the same terms.
- Payments are often interest-only, so the balance may not go down during the term (FSRA). If interest is added to the balance instead, your equity can shrink even if prices stay flat.
Your home is the security
Your home acts as security for the loan. The FCAC warns that if you cannot pay the money back, you may face serious consequences, including foreclosure. You must keep the first mortgage in good standing as well as the second. Missing payments on either loan can put the home at risk. At a financial institution, the FCAC says you may usually borrow up to 80% of the home's appraised value, minus the first-mortgage balance. Private lenders set their own limits.
Compare a HELOC, a refinance and blend-and-extend first
A private second mortgage should not be the first call. Compare these alternatives in the same conversation:
- A HELOC is revolving credit secured by your home, usually limited to 65% of the home's value. You typically need to qualify on income and credit, and at a bank you will need to pass a stress test. The home is still at risk if you do not pay it back (FCAC, Home equity lines of credit). See how a HELOC works in Alberta, or, for homeowners 55 and older, reverse mortgage vs. HELOC.
- A refinance replaces your current mortgage and can include additional funds, but breaking a closed term normally means a prepayment penalty and a new rate on the whole balance (FCAC, Prepayment penalties). More on refinancing in Alberta.
- Blend-and-extend is an early-renewal option some lenders offer. The FCAC says the lender blends your current rate with the rate for a new term and extends the term, usually without a prepayment penalty, though administrative fees may apply (FCAC, Breaking your mortgage contract). That can help if you want a different rate, but it does not, on its own, raise cash.
Have an exit plan before you sign
FSRA tells borrowers they need a realistic exit strategy and a back-up plan, because a private mortgage is meant to be temporary (FSRA, Do they have a plan to get out?). The usual exits are refinancing to a regular lender once you can qualify, or selling with enough equity today to cover both mortgages, interest, fees and sale costs. A plan that only works if the property goes up in value is not a reliable exit.
Calgary, Edmonton and rural Alberta
The idea is the same across the province: a second mortgage sits behind the first, wherever the home is. What changes is the property. Lenders will look at the appraisal and the type of property, including condos in the cities and acreages with well and septic systems. See acreage and rural mortgages in Alberta. Mortgage brokerages and their associates in Alberta are licensed by the Real Estate Council of Alberta (RECA). You can confirm a licence on RECA ProCheck. Any broker fee must be disclosed to you in writing before you commit.
Questions to ask before you sign
- Why a private second mortgage, and not a HELOC, a refinance or a second mortgage from a regular lender?
- Will my first mortgage rate and term stay unchanged, and do I need my first lender's consent?
- What is the total cost: interest, lender fee, broker fee, legal costs and any fees at payout?
- How long is the term, are payments interest-only, and can I pay it off early?
- What is my exit plan, and what happens if a payment is late or missed?
Have your lawyer review the documents before you sign.
Next steps
John Antle, Sub Mortgage Broker - Team Lead, Pineapple National Inc.
General information only, not personalized financial or mortgage advice. Please speak with a licensed mortgage professional about your situation. Private second-mortgage rates, fees, terms and renewal conditions vary by lender and are not quoted here. The equity limits described by the FCAC are typical of financial institutions and may differ with a private lender. Guidance from FSRA is Ontario consumer and industry material, cited because it is official public guidance on private mortgages; Alberta licensing is through RECA. Private lending is not suitable for everyone. Your home secures the loan. All mortgages are subject to lender approval (O.A.C.); approval, terms, savings and your exit are not guaranteed. This page was checked against the sources on November 13, 2026.
