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What is a Second Mortgage?

You might have heard of a thing called a second mortgage. Do you know what this is or how it works? In order to make sure that you have a mortgage process that you can really work with you will need to know everything that is available to you and everything that you might come across. The following is a little bit about a second mortgage. You need to know what it is and how it is referred to, because it can go by different names. Let's take some time and make sure that everything works out in the best way possible, because your mortgage and your finances will count on this. Any time you take now will help you in the future.

What is This?

A second mortgage is actually something that is secured by the home. If you ever take out a mortgage, but have taken out a mortgage previously, the new mortgage automatically becomes a second mortgage. The second mortgages will always be behind the first mortgage in importance. This means that if you are forced into a foreclosure the first mortgage will be the thing that you have to handle first, and then the second mortgage will come into play. The risk is generally higher on a second mortgage so the interest rate might be higher as well. A positive is that the interest on this payment is often times tax deductible, so use that to your advantage. You also have to realize that these second mortgages are shorter in time length then your first mortgage might be. Know how you will have to pay this off before you get in too deep.

Other Ways of Referring to These Mortgages

You might be surprised to hear this, but second mortgages are very common. These second mortgages are also referred to as home equity loans and home equity line of credit. This might sound more familiar now, and some of you might even have a firm grasp on how this works. You can use this money however you want; you just have to make sure that you pay it off. Whenever someone is talking about a second mortgage, know that they are discussing using your equity to gain a new mortgage that you can have.

In the End

You need to make sure that if you are going to get a second mortgage that you use it wisely. You do not run to run yourself into any financial troubles on the second mortgage if you were doing well on the first one. If you use this money wisely and pay it off properly then you will be able to improve your life. Just make sure that this is how a second mortgage affects you.

National Rate Averages

Mortgage Rates

Product Rate
5/1 yr ARM 3.147%
1 yr ARM 3.299%
15 yr fixed 3.221%
30 yr fixed 3.815%

Home Equity Rates

* Updated Jun 8, 2012