How they're different
A HELOC is a revolving line of credit tied to your home equity, typically offered by chartered banks. You draw what you need, pay it back, and draw again — like a credit card secured by your home. Qualification is full-bank: strong credit, provable income, and stress-tested debt ratios.
A second mortgage is a lump-sum loan in second position behind your first mortgage. Most second mortgages in Ontario come from alternative or private lending partners, and they qualify primarily on equity — credit and income matter, but they don't gate the approval the way they do at a bank.
Qualification, side by side
- HELOC: bank-grade credit, provable income, passes the federal stress test
- Second mortgage (private/alternative): built primarily on equity and exit strategy
Cost, side by side
- HELOC: usually prime + a small spread, no lender fee
- Second mortgage: generally 9%–14% in Ontario in 2026, plus a 1%–3% lender fee — but it's available when a HELOC isn't
When the HELOC wins
If you qualify at a bank, a HELOC is almost always cheaper. It's the right tool for predictable cash flow, ongoing access, and emergency reserve.
When the second mortgage wins
If your bank declined a HELOC because of credit, income documentation, or a recent credit event — or if you need funds in days rather than weeks — an equity-based second mortgage is often the realistic option.