Second mortgage, refinance, HELOC, B lender or wait — which actually costs less?
Six routes to the same money, priced honestly side by side. The cheapest one is often not the one you were shown first.
The six real options
1. Refinance the first mortgage
Replace your existing mortgage with a larger one. Cleanest structure and usually the best rate, but you pay a prepayment penalty to break the current mortgage and you lose your existing rate. Best when renewal is close or the penalty is modest.
2. Second mortgage
Leaves the first untouched, so no penalty and no losing a good rate. Higher rate and fees on the new money only. Best when the first mortgage is worth protecting. More on second mortgages.
3. HELOC
Revolving, flexible, generally the cheapest option — if you qualify. Requires solid credit and provable income, which is exactly what rules it out for many of the people who need funds most.
4. B lender mortgage
Between the banks and private. More flexible on income and credit than a bank, materially cheaper than private. Generally requires 20 per cent equity or down payment because these are uninsured. Often the right answer for self-employed borrowers.
5. Private mortgage
Fastest and most flexible, and the most expensive. Approved on equity and property rather than credit. A short-term bridge with a dated exit, never a long-term plan. More on private mortgages.
6. Do nothing yet
A legitimate answer that no one selling mortgages offers you. If the need is not urgent and renewal is within about six months, waiting avoids a penalty and lets you restructure everything at once. Sometimes the right advice is to come back in four months.
How to compare them properly
Put every option through the same five questions:
- What is the total dollar cost over the full term — interest plus every fee?
- What happens to my existing first mortgage, and what does breaking it cost?
- What is the monthly payment, and does it genuinely fit?
- What is the exit, and by what date?
- What happens if my circumstances do not improve as expected?
The last two are where most comparisons fall apart. A cheap option with no exit is not cheap.
What I will do
Price the realistic options in dollars for your actual numbers, tell you which is cheapest over the term you need, and flag the risks in each. Including, where it applies, the recommendation not to borrow at all.
Related: refinancing, debt consolidation, calculators, costs explained.
Comparison questions, answered
Is a second mortgage cheaper than refinancing?
It depends almost entirely on your existing first mortgage. If breaking it triggers a large prepayment penalty, or you hold a rate you could not get again today, a second is often cheaper overall despite the higher headline rate. If your first is near renewal or the penalty is small, refinancing everything into one mortgage usually wins.
What is the difference between a HELOC and a second mortgage?
A HELOC is revolving credit secured against the home, generally cheaper but requiring stronger credit and income. A second mortgage is a fixed lump sum, more expensive, and far more achievable with bruised credit or hard-to-document income. Banks approve HELOCs on qualification; second mortgages are approved largely on equity.
When does waiting until renewal beat borrowing now?
When the need is not urgent and renewal is within roughly six months. You avoid a penalty, avoid setup fees, and can restructure everything at once. If the need is urgent, or renewal is a year or more away, waiting usually costs more than acting.
What is a B lender and when should I consider one?
A B lender sits between the banks and private lenders, with more flexible income and credit rules than a bank and considerably better pricing than private. Good fit for self-employed borrowers or bruised credit with reasonable equity, usually needing 20 per cent down or equity because these are uninsured mortgages.
How do I compare two offers fairly?
Total dollar cost over the full term. Rate, lender fee, brokerage fee, legal, appraisal, registration and discharge, added together. On short terms the fees frequently outweigh the rate, so comparing rates alone is misleading.
See the numbers before you decide
No application, no credit pull. You will get the realistic options in dollars, and a straight recommendation.
Rajiv Verma, Mortgage Broker · Mortgage Architects, FSRA Brokerage Licence #12728 · Serving Ontario. General information about mortgage options, not legal, accounting, tax or insolvency advice, and not an offer of credit. Final approval depends on the complete application and lender review.