What is a Second Mortgage?

Second Mortgage

Most of you might think that since you already have a first mortgage, there would be no need for a second mortgage.  However, a second mortgage might is more important than you think. The primary purpose of this article is to answer any questions you might have surrounding a second mortgage.

A second mortgage is a second loan that you take on your home,  in addition to your primary mortgage. This loan enables you to borrow up to 80% against the value of your home. In easier terms, just imagine this as a lien taken out on another property you own. Interest rates may be fixed or variable and are usually higher than the first mortgage.

How does it work?

This mortgage uses your home as collateral, meaning you put your home as security and if you default on any payments, your home would be the property of the lender The mortgage is referred to as a second mortgage due to the fact that your original mortgage is commonly the first mortgage to be paid if sometime in the future, your property goes into foreclosure. If a situation happens where you can’t pay off your loan, and the lender decides to sell your property, your first loan could be paid first. Second mortgages are usually used for home improvement loans and debt consolidations.

Pros of A Second Mortgage

  • Higher Loan Amounts: Second mortgages are secured using your own home. As a result,  the amount of money to be secured allows you to borrow large amounts of money. The amount to be paid depends on your lender.
  • Potential Tax Benefits: With a second mortgage, you may be able to secure a mortgage interest deduction for all interest paid.

    Cons of A Second Mortgage
  • Costly: Acquiring a second mortgage might be very expensive as there are a lot of factors to take into account, like appraisal fees, title search, title insurance and title fees which might be costly to pay all at once upfront.
  • Foreclosure Risks: If you default on a payment, the lender is entitled to take back your home from borrowers who are not able to pay their mortgage. This can be a problem if you have a family because you might need to make last-minute plans for housing needs.


Considering getting a second mortgage? Contact one of our mortgage specialists today.