From the Superpages.com
A second mortgage is one that is a loan that is taken after a first mortgage, regardless of whether or not the first mortgage has been retired. It is a secured loan that uses the house and the amount equity in the property as it basis. The amount available for the loan is determined by the current value of the property and the amount owed.
Why take a second mortgage
In general, second mortgages are assumed in order to pay for debt consolidation, home improvements, tuition, or emergency expenses. They run concurrently with the first mortgage and, in the event of default, must be paid off.
Basics
Interest rates for second mortgages vary according to the borrower’s credit rating and the prevailing prime interest rate at the time the mortgage is sought. Underwriting guidelines are a little more lenient for second mortgages, so acquiring one takes less time. Also, these mortgages have lower associated fees and costs, which may balance out a higher interest rate.
Payments are made on a monthly basis, like a first mortgage. It usually is a fixed rate loan with set monthly payments, although variable rate mortgages are available.
There are three typical types of second mortgage:
- Traditional loan
- Home equity loan
- Home equity line of credit
Each of these has its own sets of regulations and requirements, and must be carefully considered before assuming one.
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