Second Mortgages & Private Lending Alberta — When Traditional Financing Isn't an Option
Written by Shawn Selanders | RECA-Licensed Mortgage Broker | 25+ Years Experience | Updated February 2026
Sometimes a traditional bank mortgage isn't available — or isn't the best option. If you have equity in your home but don't qualify for a standard refinance (or don't want to break your existing mortgage), a second mortgage or private lending may be the answer.
These solutions are not for everyone. The rates are higher, the fees are real, and they should be used strategically — not as a long-term plan. But when you need fast access to equity, when a bank says no, or when breaking your first mortgage would cost thousands in penalties, a second mortgage can be exactly the right move.
This guide explains how second mortgages and private lending work in Alberta, what they cost, when they make sense, and when they don't. No sugarcoating — just straight information so you can make a good decision.
Honest Advice First
I don't push people into private lending. If a bank or credit union can solve your problem at lower cost, that's what I recommend. But when those doors close — credit issues, self-employment income, property type, urgency — I have relationships with reputable private lenders who can help.
I've arranged hundreds of second mortgages and private loans over 25+ years. I know which lenders are fair and which ones to avoid. I'll tell you the full cost upfront — no surprises.
My goal is always to get you into a better position — not to keep you in expensive financing longer than necessary.
What's on This Page
1. What Is a Second Mortgage?
A second mortgage is a loan secured against your home that sits behind your existing (first) mortgage. If you default and the property is sold, the first mortgage lender gets paid first — then the second mortgage lender gets whatever remains. That's why it's called "second" position.
Because the second lender takes more risk, second mortgages come with higher interest rates and fees than first mortgages. But they can still be significantly cheaper than credit cards, personal loans, or other unsecured debt — because they're secured by your home.
Key Things to Understand:
- Your first mortgage stays in place. You don't break it, you don't pay a penalty, you don't change your existing rate or term. The second mortgage simply sits behind it.
- You make two separate payments. Your existing first mortgage payment continues. The second mortgage has its own separate payment — either interest-only or principal + interest, depending on the lender.
- LTV limits apply. Institutional lenders (banks, credit unions) cap your combined mortgages at 80% of your home's value. Private lenders may go to 85% or occasionally higher — but the rate increases as LTV increases.
- It's meant to be temporary. Most second mortgages, especially private ones, are designed as short-term solutions (1–2 years). The plan should always include an exit strategy to move into cheaper financing.
2. Types of Second Mortgages
HELOC (Home Equity Line of Credit)
Revolving credit — borrow, repay, borrow again. Variable rate (prime + 0.50% typical). Interest-only minimum payments.
Max LTV: 65% standalone (80% combined with first mortgage)
Requires: Good credit (680+), verified income, 20%+ equity
Best for: Homeowners with good credit who want ongoing access to equity. HELOC guide →
B-Lender Second Mortgage
Lump sum loan from alternative/B lenders. Rates typically 6%–12%. Usually 1–2 year terms.
Max LTV: 75–80%
Requires: Reasonable equity, some income verification. More flexible on credit than banks.
Best for: Homeowners who don't qualify for a bank HELOC but have decent equity and some credit history.
Private Second Mortgage
Lump sum from private individuals or investment groups. Rates typically 8%–15%. Usually 1-year terms, interest-only.
Max LTV: 80–85% (some go higher at very high rates)
Requires: Equity. Period. Credit score and income are secondary. Approval is equity-driven.
Best for: Homeowners with poor credit, unverifiable income, or urgent needs who have substantial equity.
3. How Private Lending Works
Private lenders are individuals or investment groups who lend their own money (not depositor money like banks). Because they're taking personal risk, they charge more — but they can also approve deals that no bank would touch.
What Makes Private Lending Different:
Equity is king. Private lenders care most about how much equity is in your property. If there's enough equity to protect their investment, they'll often approve the deal regardless of your credit score or income documentation.
Speed. Private mortgages can be approved and funded in as little as 48–72 hours in urgent situations. Bank mortgages take weeks.
Flexibility. No rigid debt-ratio formulas. No stress test. The lender evaluates the deal holistically — equity, property location, exit strategy, borrower situation.
Cost. Higher interest rates (8%–15%), plus lender fees (2%–4% of the loan) and broker fees. This is the trade-off for accessibility and speed.
Private Lending Can Be Either:
- Private first mortgage: Replaces or substitutes for a bank first mortgage. Used when a borrower can't qualify for institutional financing at all. Rates are lower than private seconds (since it's first position — less risk for the lender).
- Private second mortgage: Sits behind an existing first mortgage. Used when a borrower needs additional funds but can't (or shouldn't) refinance the first mortgage.
4. What It Actually Costs — Rates & Fees
Transparency matters here. Second mortgages and private lending cost more than traditional financing. Here's what to expect:
| HELOC (Bank) | B-Lender 2nd | Private 2nd | |
|---|---|---|---|
| Interest rate | 4.5%–5.5% | 6%–12% | 8%–15% |
| Lender fee | Usually none | 1%–2% | 2%–4% |
| Broker fee | $0 (lender pays) | $0–1% | 1%–3% |
| Legal fees | $500–$1,000 | $1,000–$1,500 | $1,000–$2,000 |
| Appraisal | $300–$500 | $300–$500 | $300–$500 |
| Max LTV | 65%–80% | 75%–80% | 80%–85% |
| Typical term | Ongoing (revolving) | 1–2 years | 1 year |
| Payment type | Interest only | P+I or interest only | Interest only (typically) |
Example — Private Second Mortgage Cost:
Home value: $550,000
First mortgage: $380,000
Second mortgage amount: $50,000
Combined LTV: 78% ($430,000 / $550,000)
Interest rate: 10%
Monthly interest payment: ~$417
Lender fee (3%): $1,500 (deducted from proceeds)
Broker fee (2%): $1,000 (deducted from proceeds)
Legal fees: $1,500
Appraisal: $400
Net funds received: ~$45,600 (after fees deducted from the $50K loan)
Total annual cost: ~$9,400 ($5,000 interest + $4,400 in fees over 1 year)
Is that expensive? Yes. But compare it to carrying $50,000 on credit cards at 20% interest = $10,000/year with no plan to pay it off. Or compare it to a prepayment penalty of $12,000+ to break your first mortgage mid-term. Context matters. I'll show you all the options and their true costs side by side.
5. When a Second Mortgage Makes Sense
✔ To avoid breaking a low-rate first mortgage. If your first mortgage is at 3%–4% with 2+ years remaining, breaking it could cost $5,000–$15,000+ in penalties. A second mortgage lets you access equity without touching the first. At renewal, you can refinance everything into a single low-rate mortgage — penalty-free.
✔ To consolidate high-interest debt. If you're carrying $30K–$60K on credit cards (20%+ interest) and can't qualify for a bank refinance, a private second mortgage at 10%–12% is still a massive improvement. It buys you time to improve your credit, then refinance to prime rates. Debt consolidation guide →
✔ When the bank says no. Bruised credit, self-employment income that doesn't show well on paper, recent job change, a property that doesn't fit standard guidelines — banks decline for many reasons. If you have equity, private lending can get you funded while you fix whatever caused the decline.
✔ For urgent financial needs. CRA tax arrears, a business opportunity, preventing a foreclosure on another property, legal settlement — situations where speed matters. Private lenders can fund in 48–72 hours when needed.
✔ As a bridge to better financing. A private second mortgage for 12 months while you rebuild credit, file updated tax returns, or stabilize your income — then refinance into a standard mortgage at much better rates. This is the strategy I use most often.
✘ When It Does NOT Make Sense:
- If you can qualify for a bank refinance or HELOC — always cheaper.
- If you don't have a realistic exit strategy to get out of the private mortgage within 1–2 years.
- If the monthly payments (first + second mortgage combined) will strain your budget beyond what's manageable.
- If you're using it to fund a lifestyle rather than solve a specific, time-limited financial problem.
6. How to Qualify
| Factor | Bank HELOC | B-Lender | Private |
|---|---|---|---|
| Credit score | 680+ | 550+ | Not a factor |
| Income verification | Full verification | Stated or alternative docs | Minimal or none |
| Stress test | Yes | Varies | No |
| Min. equity | 20% | 20–25% | 15–20% |
| Primary factor | Income + credit | Equity + income | Equity |
| Approval speed | 2–4 weeks | 1–2 weeks | 48 hours – 1 week |
For private lending, the most important factor is a professional appraisal confirming enough equity in the property. The lender wants to know that if everything goes wrong, they can recover their money through a sale of the home. The more equity you have, the better the rate and terms you'll receive.
7. The Exit Strategy — Getting Out of Private Lending
This is the most important section on this page. No one should stay in a private mortgage longer than necessary. Before I arrange any private financing, I build an exit plan to get you back to institutional rates.
Common Exit Strategies:
1. Refinance at first mortgage renewal. If your first mortgage renews in 12–18 months, we use a private second to bridge the gap — then refinance the first and second into a single new mortgage at prime rates. No penalty. Lowest total cost.
2. Rebuild credit and refinance. If credit issues caused the need for private lending, I'll outline exactly what steps to take over 12 months to raise your score. Once improved, you qualify for institutional refinancing at dramatically lower rates.
3. File updated tax returns. Self-employed borrowers who need time to file or amend tax returns can use private lending as a bridge — then refinance once the CRA documents are available and income is provable.
4. Sell the property. In some cases, selling is the best exit. The private mortgage buys time to sell on your terms — not under foreclosure pressure.
My commitment: I won't arrange a private mortgage without a realistic exit strategy. If I don't believe there's a clear path back to better financing, I'll tell you — and we'll discuss alternatives. This is not a sales pitch. It's the right way to use this tool.
8. Frequently Asked Questions
Q: Does my first mortgage lender need to approve the second mortgage?
A: Most first mortgage terms include a clause requiring notification or consent for additional charges on title. In practice, most lenders allow second mortgages as long as the combined LTV stays within limits. I'll check your first mortgage terms before proceeding.
Q: Can I get a private mortgage on an acreage or rural property?
A: Yes — though not all private lenders will do rural properties. The property needs to be in an area with reasonable resale demand. I work with private lenders who specifically finance rural Alberta properties. Acreage guide →
Q: Can I get a private mortgage with a consumer proposal or bankruptcy?
A: Yes — this is one of the most common reasons people use private lending. As long as there's sufficient equity, private lenders will consider it. You'll typically pay higher rates and fees, but it gives you access to funds while you work through the insolvency process and rebuild.
Q: What happens if I can't pay off the second mortgage at the end of the term?
A: Most private lenders will renew for another term — but renewal fees apply again (typically 1%–2%). This is why the exit strategy matters so much. Renewing a private mortgage year after year gets very expensive. The goal is always to move to cheaper financing as quickly as possible.
Q: Are the fees negotiable?
A: To some degree, yes. Lender fees and broker fees can vary based on the size of the loan, the LTV, your overall risk profile, and the lender's appetite. I always negotiate on your behalf to get the lowest total cost. I'll disclose all fees upfront — in writing — before you commit.
Q: Can I use a second mortgage to stop a foreclosure or power of sale?
A: Yes — this is an emergency use case where private lending can literally save your home. If you're behind on mortgage payments and your lender has started enforcement, a private second mortgage can pay off the arrears and stop the process. Time is critical — call immediately if you're in this situation.
Q: How much does it cost to work with a broker for private lending?
A: For bank and B-lender products, my fee is $0 — the lender pays me. For private mortgages, there is a broker fee (typically 1%–3% of the loan amount), which is deducted from the loan proceeds. I disclose this fully before you commit, and I'll explain whether the total cost makes sense for your situation.
9. Talk to Shawn — Honest Assessment
If a bank can do it, I'll tell you. If private lending is the right tool for your situation, I'll explain exactly what it costs, how long you'll be in it, and how we'll get you out. No pressure, no hidden fees, no surprises. Call me.
Second Mortgage & Private Lending — Honest Advice
25+ years of experience. Relationships with reputable lenders. Full cost disclosure upfront.
Call/Text: 403-703-6847
Email: ShawnSelanders@gmail.com
Office: 614 High View Park NW, High River, AB T1V 1E5
Hours: Monday to Friday: 9:00 – 7:00 | Saturday & Sunday: 12:00 – 5:00
Serving homeowners across Alberta:
📊 Check Your Credit Score For Free
Know where you stand before we talk. Free, fast, and it won't affect your score.
Click For a Free Credit Check ↗📱 Download My Mortgage App
Affordability calculators, real-time rates, and the ability to start your application — right from your phone.
Explore My Mortgage Guides
Shawn Selanders — RECA-licensed mortgage broker
Your Local Mortgage Professionals — Independent Mortgage Professional
Serving Calgary, Okotoks, High River, Diamond Valley, Foothills County, and all of Alberta since 1999
This page is for informational purposes only and does not constitute financial advice. Second mortgage and private lending rates, fees, and terms are illustrative and vary by lender, property, and borrower profile. All fees will be disclosed in writing before you commit. Private mortgages carry higher costs and should be used as short-term solutions with a clear exit strategy. Your home is used as collateral — defaulting on payments may result in foreclosure. Always consult a licensed mortgage professional and legal advisor. O.A.C. E.&O.E.