Second Mortgage
 

A Second Mortgage Loan is a mortgage granted, (and registered) when there is already a first mortgage registered against the property. If you are like most homeowners, you probably have a first mortgage loan on your home. As you make monthly mortgage payments and the value of the home increases, your interest in the property (called "equity") grows. After a while, some homeowners may wish to borrow against the equity in their home to get cash, to make home improvements, to educate their children, or to consolidate personal debts. Because such loans are in addition to the first mortgage on the home, they are commonly called second mortgage loans.

Second mortgage loans are different from first mortgages in several ways. They often carry a higher interest rate, and they usually are for a shorter time, 15 years or less. In addition, they may require a large single payment at the end of the term, commonly known as a balloon payment.

A 2nd mortgage is an additional loan taken out by the borrower secured by real estate. From the borrower's point of view it is very similar to the first mortgage on the same piece of real estate. As the name indicates, the 2nd mortgage sits in second position behind the first and is second in priority.

A 2nd mortgage is generally a less expensive method in which to finance debt. With the loan being secured by real estate, the interest rate is generally lower than those charged through personal unsecured loans or credit cards. As well, with payments being interest only or amortized over a longer period of time the monthly payments may be lower. This would increase monthly cash flow.

2nd mortgages can offer a practical plan for consolidating debts. Also, because 2nd mortgages may be tax deductible, non-deductible interest payments may be converted into deductible mortgage interest. There is no equity required, with 2nd mortgages up to 125% loan to value. Your home is eligible for a loan, even if you currently have no equity.

2nd mortgages are simple interest home loans, which means interest is compounded annually, as opposed to credit cards that charge interest compounded daily, where you can pay up to 3 times more interest. You can use your mortgage to pay off credit cards, personal loans, car loans, taxes, or most any other debt. The flexibility of the program allows for a combination of paying bills, improving your home, or taking cash out for your personal use.