Second Mortgage - Using Your Home As Security... Twice

By Mark Bonders for mortgage-and-loan-info.com

A second mortgage is a second 'claim' to property you already used as security to pay off a previous mortgage. As such, 2nd mortgages apply higher interest rates because the lender's risk is greater. Should you ever default in your loans, the first mortgage lender will get 'first dips' into your property (i.e., the second lender will have more difficulty seeking payment as his rights to it are subordinate to the first mortgage lender).

Since 2nd mortgages are characterized by shorter terms and higher interest rates, why then, you ask, do people get second mortgages? Most people acquire second mortgages to finance house improvements, pay credit card debt or use the mortgage as a means to consolidate debt. Find out if the money you can get from second mortgages is worth it by using a mortgage payment calculator online. By finding out the required monthly payments, you can easily gauge if the funds released for the 2nd mortgage are worth acquiring. Remember that you will now need to pay for TWO mortgage repayments monthly should you decide to get another mortgage.

Second Mortgages - A Home Equity Loan or Line of Credit?

With a home equity loan, you can avail of the loan amount in full and settle the principal and interest monthly. The advantage of this type of mortgage is that you can immediately settle any huge debts or finance more costly projects.

With a line of credit type of mortgage, you get the loan amount in smaller portions or on an 'as required' basis. A bit of warning though, line of credit 2nd mortgages are considered special types credit and as such, mortgage lenders usually apply an additional percentage. You need to calculate if this 'privilege' is worth the additional expense. The advantage to this type of mortgage is that repayments are directly proportional to withdrawals.