What is a Second Mortgage?
The term “second mortgage” refers to a
mortgage loan that a consumer takes out on a property
that already has an existing first mortgage loan. The
amount you can borrow is sometimes related to how much
equity you have in your home. The term “equity”
refers to the amount of money you have invested in the
house, measurable by the difference between the amount
you still need to pay on the house and the property’s
current value on the market.
So, for example, if your home is worth around $150,000
in today’s market, and you still owe $90,000,
you have equity in the amount of approximately $60,000.
The second mortgage loan will be an additional lien
on your home that will be held by the lending institution
that finances it. This lien will be secondary to the
lien held by the institution that financed your first
mortgage loan. If the lending institution for both loans
is one and the same, that institution will hold two
liens on your property.
In fact, many people do choose to return to their original
lender when they make the decision to take out a second
mortgage loan. However, while this might seem like a
convenient option, consumers would be well advised to
do some research first, and make sure their lending
institution is offering them the best deal, and the
best customer service, available.
Regardless of the lending institution you select, make
sure you are clear about all the terms and expenses
associated with your new mortgage loan. Your loan officer
is a good resource, and will be happy to clarify any
concepts you do not understand, as well as, answer any
questions you may have.