SECOND MORTGAGE

Sometimes when a consumer cannot get as large a first mortgage as they need, they will take out a second mortgage. Sometimes people call these loans junior to the first mortgage.

By definition, a second mortgage is a mortgage loan that is registered on title after another mortgage (the first mortgage) and, therefore, is behind the first mortgage in priority. In the event of default and sale of the property, the second mortgage will only be paid if there are funds left after the payment of the first mortgage.

A second mortgage can be used to reduce the cash down payment for your purchase of property. For example, if you’re buying a house for $100,000 and your down payment is $20,000, you can reduce that down payment to $10,000 by getting another mortgage for $10,000. Usually the second mortgage will have a higher interest rate because it involves a greater risk to the lender since any proceeds from the property go first to pay off the first mortgage.

A second mortgage is viable under specific circumstances but it is important to have your mortgage needs carefully analyzed by a professional with objective advice.