Friday, 29th May 2020 | Accounting

Personal loans vs. second mortgages: Weighing your options

At first glance, a personal loan and second mortgage seem indistinguishable. But they're not. Read on to learn more about each and determine which is right for you.

If like many Canadians, you find yourself in need of money from time to time, there are a few options out there you can consider. Some homeowners take out a second mortgage—essentially a lump sum paid in fixed installments that uses home equity as collateral—while others consider a personal loan, an allotment that may be secured with collateral or unsecured.  Read on to learn more about each and determine which is right for you.

What's a personal loan? What's a second mortgage?

Before you choose your product, it’s crucial that you understand the parameters of each. A personal loan comes in a lump sum and you agree to pay it back in installments over a certain period of time. With an iCapital loan, the term ranges from nine months to five years. Personal loans can be secured or unsecured, a term that refers to whether or not you put up collateral against the loan. With a secured loan, the collateral mitigates some of the lending institution’s risk so you can expect to get a lower interest rate.

A second mortgage is a loan you take out against the value of your home. Canadian homeowners can borrow up to 80% of the appraised value of their home, minus any balance on their first mortgage. A second mortgage is, by definition, a secured loan.

Which is better for you?

These two lending options share some of the same benefits. With both a personal loan and a second mortgage:

  • You receive the money in a lump sum    
  • You can use your home equity as collateral    
  • You can pay back the balance in installments

The similarities, however, end there. Consider the following:


Very little paperwork is required to apply for a personal loan—usually just basic documents to verify identity and income. In fact, the process takes around 10 minutes and is fully online. In contrast, the process and paperwork to apply for a second mortgage are nearly as daunting as getting the mortgage in the first place. Applicants should expect to gather at least two years of financial documents.   


If you apply for a second mortgage, you can expect to wait several weeks for an answer. With a personal loan, you’ll get an answer within 24 hours.     


With a second mortgage, you’re borrowing against your home equity. Unless your home is paid off in full, you’ll need to continue to pay both mortgages simultaneously, and if you default you could lose your home. If you don’t want to involve your home in the debt, you can apply for an unsecured personal loan or, alternately, a secured personal loan with something else as collateral.    


With a second mortgage, you might have to pay for costs like a title search, title insurance, appraisal, and other legal fees. There are no such costs associated with applying for a personal loan.   

Loan amount 

If you decide to take out a second mortgage you may be eligible to borrow up to 80% of the value of your home. Personal loans are generally $45,000 or less.

When choosing between a second mortgage and a personal loan, consider all your requirements. The best option for you might be determined by how much you need and how quickly. If you’re looking at borrowing more than $45,000, a second mortgage may be the best way forward. But if you’re on a tight timeline and seeking less than $45,000, it’s hard to beat a personal loan.


Read Also

Digital transformation for small businesses

It’s a difficult time for Canadian small and medium businesses (SMBs) looking to maintain their market share. The usual challenges like cash flow, regulatory adherence, and beating out competitors are even more intense in the shadow of COVID-19. Luckily for business owners, one of the most effective ways to stay relevant—digital transformation—will actually improve your position with all these, even during the pandemic. If you’re looking for a way to boost your business in this chaotic time, read on.

Understanding digital transformation

Digital transformation is a phrase used to describe the process of deploying digital technology to solve business problems. Having a website falls under this umbrella, but so too does using cloud computing, application (ie. “app”) development, and the use of a customer relationship management (CRM) tool. Part of the transition involves taking previously manual processes to the digital realm, but it’s important to understand that this change is not simply about hardware or software. A digital transformation will also result in a positive change to your business’ culture.
Why digital transformation matters
If you’ve been in business for a while you might feel like there’s always a new must-do on the horizon. In part, that’s the nature of business but there are some very compelling reasons to take your digital transformation seriously.
In an effort to understand the impact of digital technologies on small and medium-sized businesses, financing company BDC has engaged in five years worth of research. Their results reveal six major trends reshaping Canada’s business landscape:
  • The workforce is aging
  • The millennial generation has entered the workforce
  • The population is increasingly culturally diverse
  • Virtual marketplaces are growing
  • Business activities are increasingly automated
  • The rise of the data economy
Clearly, there’s a profound shift taking place—a shift that your business must acknowledge and respond to if you wish to remain relevant.

You need to evolve—now

There’s an old saying, evolve or die, that’s as applicable to business as to baboons, and there are very real consequences for failing to bring your organization up to speed.
  • You’ll increasingly lose business to competitors
  • You’ll be less efficient, and therefore less financially strong than competitors
  • You’ll be less attractive to employees
  • You’ll eventually become obsolete
It’s not a pretty picture. Fortunately, a digital transformation can bring you up to speed to meet the changing Canadian business landscape.

Here’s what to invest in

If all this feels overwhelming, don’t despair. Although a digital transformation is layered, these are tasks that can be handled in stages. There are two main perspectives to consider: operations (including tools to increase efficiency), and customer service. Keep these in mind as you prioritize your transformation.
More likely than not, your first few steps will involve your website and your online presence in general.
  • Website - Now is the time to review your website. Make sure your content is relevant and presented in a user-friendly way. Put product information and details online so your customers have access to everything they need. Get rid of any outdated code or technology (see ya, Flash!). Use popular media like video. Make buying simple, straightforward, and safe. Recognizing the rise of mobile, make sure your website is responsive (meaning it is painless to view on a phone) and, if appropriate, consider building an app.

  • Online presence - At a minimum, your business needs to be on Google and social media. People are increasingly researching online before they buy, so make sure they can access your hours, information, and customer ratings. This is even more important during this pandemic. If you’re a restaurant, for example, your menu, hours, ratings, and service options need to be online. For shopping sites, include your delivery details. Give customers the opportunity to ask questions and have them answered. You must meet your buyers where they are, so put in the time to find out where is most convenient for your customers to ask questions.

Connecting to corporate culture

Undertaking a digital transformation isn’t just for big businesses. It has a bottom-line impact for small businesses, too. Just remember that companies that pair these changes with a clear strategy, employee training, and a culture of continuous improvement do far better than those who skip this step.

A digital transformation requires a new set of processes and plan for success. Provide training and encourage curiosity. Not only will this improve the experience of your employees, studies have shown that companies that engage with this shift show higher profits.
Digital transformation is a requirement in the current Canadian business landscape. With a considered strategy, these changes will benefit your customers, your employees, and your bottom line.  


Cheat sheet: Canadian government support for individuals during the pandemic

Canadians in all corners of the country have been partially or severely impacted by the COVID-19 pandemic. If you are trying to find out what resources are available to you to help you, here is a summary of resources from the Canadian government as of June 2, 2020. 

Avoiding layoffs, rehiring employees & creating new jobs

Canada Emergency Wage Subsidy (CEWS) - The Canada Emergency Wage Subsidy (CEWS) supports employers that are hardest hit by the pandemic, and protect the jobs Canadians depend on. The subsidy generally covers 75% of an employee's wages – up to $847 per week - for employers of all sizes and across all sectors who have suffered a drop in gross revenues of at least 15% in March, and 30% in April and May. The program will be in place for a 12-week period, from March 15 to June 6, 2020.

Increased Canada Child Benefit - An extra $300 per child was delivered through the Canada Child Benefit (CCB) for 2019-20. This benefit was delivered as part of the scheduled CCB payment on May 20.

Extra time to file income tax returns - The due date for filing individual 2019 income tax returns has been deferred until June 1, 2020. Any new income tax balances due, or installments, are also being deferred until after August 31, 2020 without incurring interest or penalties.

Mortgage payment deferral - Homeowners facing financial hardship may be eligible for a mortgage payment deferral of up to six months. The deferral is an agreement between you and your lender. Typically, the agreement indicates that you and your lender have agreed to pause or suspend your mortgage payments for a certain amount of time. After the agreement ends, your mortgage payments return to normal and the deferred payments—including principal and accumulated interest–are added to the outstanding principal balance and subsequently repaid throughout the life of the mortgage. To know if you are eligible for a mortgage payment deferral or to learn what options are available, contact your lender.

Temporary 10% wage top-up for low-income essential workers - All provinces and territories have confirmed, or are in the process of confirming, plans to provide wage top-ups for essential workers. This government funding includes up to $3 billion in federal support to increase the wages of low-income essential workers. Each province or territory will determine which workers would be eligible for support, and how much support they will receive.

Special goods & services tax credit payment - A one-time special payment through the Goods and Services Tax credit for low and modest-income families. The average additional benefit will be close to $400 for single individuals and close to $600 for couples.

Extending the Work-Sharing program - The maximum duration of the Work-Sharing program has been extended from 38 weeks to 76 weeks for employers affected by COVID-19. This measure will provide income support to employees eligible for Employment Insurance who agree to reduce their normal working hours because of developments beyond the control of their employers.

There are also over a dozen support initiatives for students, recent graduates, seniors, and indigenous peoples. These can be found on the Canadian government website.


Ready to re-open: Best practices for restaurants

As the number of COVID-19 infections declines across Canada, provincial governments are beginning to implement phased reopening. This hopeful step has restaurants across the nation beginning to prepare, be it mentally or physically. Given that this is new territory for everyone, what should the preparations entail? Read on for the best practices you should follow to ensure everyone’s health and safety as you reopen your restaurant.

1. Document a reopening plan and train your staff

A safe and seamless re-opening depends on communicating and implementing the very best safety measures across your entire operation. Lessening restrictions depends on tightening precautions and that will require the participation of all management and staff. Don’t leave things to chance. Even “obvious” measures might be overlooked in the chaos of a relaunch. Write down your plan in detail, including all safety precautions, and communicate your expectations to everyone in your organization. Revise and brief your staff as required.

  • Write down your plan
  • Train all staff on safety measures
  • Revise and re-train as necessary

2. Make a physical distancing clear and easy

If you had an incorrect idea of what six feet (or two metres) was before COVID-19, you’re not alone. People don’t typically measure their personal space this way and it can be hard to gauge distance on-the-fly. Before you welcome customers back into your restaurant, use tape to mark six-foot intervals on your floor and indicate the flow of traffic with arrows. If possible, move furniture like booths or table apart and install physical barriers or close off those areas that are too close together. Post signage at the door and inside reminding people of physical distancing requirements and restrict the number of people allowed inside at once.

  • Post signs
  • Mark floors and traffic flow
  • Move or block off seating areas

Most kitchens are fairly tight quarters to begin with. Minimize physical interaction by setting up staggered task stations as possibly creating additional shifts to reduce the need for so many people in the kitchen at one time. Mark intervals on the floor as a reminder, and make sure customers and delivery drivers are kept separate from the cooking areas.

  • Mark floors
  • Create staggered stations
  • Restrict access

3. Go minimalist

Once customers return, there are a few adjustments you can make to enhance safety. If possible, prop open exterior doors for fresh air and interior doors to reduce surfaces that require touch. Remove menus, flowers, condiments, and cutlery from the tables and instead provide them once customers are seated. Use technology for remote ordering and table selection, and reduce person-to-person contact with electronic payment.

  • Prop open doors
  • Remove table-top items and provide on an as-needed basis
  • Use technology

4. Keep it clean

Those in the restaurant business should already be familiar with sanitation protocols but during COVID-19 these protections will have to be intensified. Here’s a step-by-step checklist that should help you establish and maintain a spotless restaurant.

  • Do a deep and complete clean of the entire establishment prior to re-opening
  • Clean the credit card machines, cash register, headsets, or other shared equipment
  • Establish and record an updated cleaning schedule especially for high-traffic areas like the washrooms, counters, and door handles
  • Clean tables between every seating
  • Remove and sanitize condiment containers, menus, or other tabletop items between customers
  • Make hand sanitizer available at the door, on tables, and at the cash
  • Use only approved disinfectants

5. Health and hygiene

Alongside the signs about physical distancing, post a notice explaining that customers showing signs of COVID-19 (fever, runny nose, or cough) may be refused entry to your establishment.

Your employees will need to maintain extremely high health and hygiene standards. These best practices will help your day-to-day operations:

  • Stagger start times
  • Implement health check screening at the start of every shift and send sick employees home
  • Fully train all staff on how and when to wash hands, how to maintain physical distancing, and to avoid touching their faces
  • Provide lockers or sealed bags for personal items
  • Provide PPE and gloves when applicable
  • Make hand sanitizer available at the door, on tables, and at the cash
  • Establish a point person for every shift to ensure all protocols are being followed

Restaurants and other businesses across Canada are starting the slow process of re-opening. Check this Restaurants Canada Reopening Tracker to determine the rules for your region and then proceed following these best practices for a successful and safe transition.



How Canadian businesses are reinventing themselves during the pandemic

With limits on travel and social interaction, and the evolving needs and desires of customers, virtually every business is experiencing some sort of disruption to everyday operations. There’s no shortage of stories about struggling small businesses but it’s not all bad news. There are many stories of resilience, adaptability, and creative thinking that have allowed some to pivot and thrive. Read on to learn about small business successes from coast to coast.


While online retailers may have seen a spike in sales, brick-and-mortar stores have had to adjust—and fast. For Toronto home goods store, Spruce, this has meant providing free local deliveries. “We chose to close the storefront for the safety of my employees and the community,” says owner Kim Alke, “but I take orders through my website and do contactless deliveries twice per week.” Glass Bookshop in Edmonton has taken a similar tack with free deliveries in the community and has seen sales shoot up, partly because reading is one of a dwindling group of safe activities but also likely due to the fact that co-owner Matthew Stepanic brings along his corgi, Bob, on book runs.

If pivoting to deliveries isn’t the right answer, maybe changing the product is. After initially shutting down, Toronto’s Bathing Belle designer swimwear shop reopened to sell cloth masks under a buy one-donate one model where each purchase triggers a donation to a long-term care facility in the city.

Gyms and fitness Studios

For gym and fitness facilities, going online is the only answer for safe classes. A quick response to the pandemic is what saved 3rd Degree Training in Stratford, Prince Edwards Island; within 24 hours of closing their physical location, the company began offering new daily workouts broadcast from the instructors’ garage to Facebook Live.

Toronto’s SAOR Studio made the same immediate shift to digital training and nutrition support—and went a step further. “We made our six-week training plan free to everyone and have had 1,500 people download it so far,” says founder Nathania Harrison. “We also lent all of our equipment like weights, tension bands, gliders, and yoga blocks to members so they could build their own studio at home.” They also expanded their merchandise and set up a simple ordering page on their website to boost their revenue stream.


You might expect manufacturers to face fewer COVID-related challenges but that wasn’t the case for Stonex, a seller of natural stone that had previously used a traditional showroom to display and sell their products. Unable to invite customers into their showroom like before, they innovated, building stone sample boxes similar to the fabric swatches used by tailors and dropping them off curbside. Alongside toilet paper and non-perishable food items, hand sanitizer quickly became a scarce resource across Canada. Some alcohol producers, like Victoria Distillers from Sidney, British Columbia began using a by-product from their process to produce sanitizer for their community.

Even retrofit hand sanitizers need labelling and as soon as the COVID-19 epidemic hit, Lorpon Labels stepped up with free design and packaging. However, they quickly realized that their equipment—which could cut acetate—could be used to manufacture personal protection equipment. In cooperation with a foam injection company, the label company temporarily retrofit their operations to produce protective equipment.


Although home delivery options have long existed for restaurants, restrictions on sit-down traffic and the sudden surge of home cooks have taken their toll on this industry. Most establishments can’t survive on take-out and delivery alone. Luckily, there are some very creative thinkers in the biz.

Chaeban Ice Cream, a popular artisanal and all-natural ice cream shop in Winnipeg, was forced to close due to the COVID-19 restrictions. Undeterred, owners Joseph Chaeban and Zainab Ali used their time off to come up with an all-new business model: The Chaeban Ice Cream Club. Their subscription service offers no-contact monthly ice cream deliveries to their customers’ door.

Ordering delivery is a good occasional treat but you can’t beat the freshness and taste of a just-cooked meal. This—and a desire to share Thai culture and cuisine—was behind Kasorn “Mo” Meepan’s COVID strategy. In response to the restrictions on dine-in eating, the owner of Sala Modern Thai Kitchen & Bar made the bulk of her menu available of ready-to-cook meal kits, bringing her customers food and the new skill of Thai cooking.

The plight of Canada’s restaurants has received massive amounts of attention, with many places worried that they won’t survive this period of economic instability. In a bid to support favourite establishments, we can all participate in the national #takoutday campaign which encourages purchasing a take-out meal each Wednesday (or purchase any day of the week).

For Canadian small businesses, the stakes of this pandemic are high but with some creative thinking and the willingness to support each other, we can make it through together.


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