Home Loans
Second Mortgage Loans
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By Max Bellamy
A second mortgage is a loan that is subordinate to another loan taken against the same property. They are called subordinate in the sense that if the loan is defaulted, the first loan gets paid off first before the second one. In such cases of default, any remaining money will be used to pay off the second mortgage after clearing the first.
The second mortgages are therefore riskier for the lender. Thus, second mortgage loans have a higher interest rate. They also carry closing costs and points that make them more expensive.
A line-of-credit second mortgage is another type in which the borrower applies for a loan but does not avail himself of it immediately. He can draw the money whenever he needs it.
Sometimes a second mortgage is taken at the same time the borrower secures the first mortgage. For example if the borrower wants to obtain a loan that demands a forty percent down payment and he has only thirty percent, he can apply for a mortgage for the required ten percent.
A second mortgage loan can also be applied for a value that is more than that of the borrower
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