What is a 2nd Mortgage? A 2nd mortgage is a secured loan in which borrower guarantees some form of asset (e.g. property, vehicle) as collateral for the loan. This is possible since a property can have multiple loans on it. First mortgage is a mortgage that is registered first with county or city registry. A mortgage which is registered after the first one is referred to as a second mortgage. Second mortgage is often referred to as a Subordinate loan. This is because the first mortgage takes priority over the second mortgage in case the borrower defaults. First mortgage will be paid first and only after that, the second one will be paid. This is the reason second mortgages always comes with a higher interest rates.

People take out second mortgage for variety of reasons including debt repayment, medical bills payment, financing the education costs, home renovation, buying another home and creating a home equity line of credit. Second mortgage is also referred to as Home Equity Loan.

There are advantages and disadvantages to 2nd mortgages. Second mortgages can help repay your debt. It can also help finance your high education costs. It can also help save some money in tax by claiming the interest on the loan as a deduction in itemized deduction. Interest on second mortgage can be tax deductible up to $100,000 of the loan amount. According to industry experts, many times fixed interest rate of second mortgage allows you to save up to 3 times more than the minimum payments on credit cards.

Some of the disadvantages of 2nd mortgage are that it comes with a higher interest rate than the primary or the first mortgage. Since second mortgage will not be paid until the first mortgage is paid in case borrower defaults. second mortgage are often riskier for the lenders. Second disadvantage with second mortgage is it comes with hefty fees. So it is often advisable to ensure the intended use of the second mortgage is well worth the risk. Second mortgages can often be found with either your existing bank or from your primary mortgage lender.