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The Second Mortgage Agreement serves as a crucial instrument in Canadian real estate financing, providing property owners with access to additional funding while maintaining the priority of an existing first mortgage. This document is typically used when property owners need additional financing but either cannot or choose not to refinance their first mortgage, perhaps due to favorable first mortgage terms or prepayment penalties. The agreement must comply with both federal Canadian legislation (such as the Interest Act) and provincial real estate and consumer protection laws. It includes detailed provisions for the loan amount, interest rates, payment terms, default remedies, and importantly, the subordinate nature of the security interest. The document also addresses the rights and obligations of all parties involved, with particular attention to the relationship between the second mortgagee and the first mortgage holder.

1. Parties: Identification of the mortgagor (borrower) and mortgagee (lender), including full legal names and addresses

2. Background: Context of the agreement, including acknowledgment of the first mortgage and its priority position

3. Definitions: Key terms used throughout the agreement, including property description, security, and relevant financial terms

4. Loan Amount and Interest: Details of the principal amount, interest rate, calculation method, and payment terms

5. Security: Description of the property being mortgaged and confirmation of second-position security interest

6. Payment Terms: Schedule of payments, including amounts, due dates, and method of payment

7. Representations and Warranties: Borrower's declarations regarding property ownership, first mortgage status, and authority to enter agreement

8. Covenants: Ongoing obligations of the borrower, including property maintenance, insurance, and tax payments

9. Default Events: Circumstances constituting default and consequences thereof

10. Remedies: Lender's rights and remedies upon default, subject to first mortgagee's rights

11. Priority and Subordination: Explicit acknowledgment of subordination to first mortgage and related terms

12. Notice Requirements: Communication procedures between parties

13. General Provisions: Standard clauses including governing law, amendment procedures, and severability