You may be well-acquainted with traditional home mortgage loans. Anyways, there is another type of mortgage known as the second mortgage which is secured against the same property as that of the original mortgage loan. The term second signifies that second mortgage loan is the subordinate to the original home mortgage loan. In the event of default, first mortgage loan receives the first priority and the first mortgage loan is paid off first and the second mortgage loan is taken care once the first mortgage loan is paid off.
A second mortgage loan is taken out for a variety of purposes. These loans are offered on the basis of your equity in your home. One pertinent question that may arise is that why you would risk your home with a second mortgage. In fact, you may require a lot of money for a variety of purposes. The credit that you have taken out through credit cards may not fulfil your monetary needs and you still may be in want of money. In such case, if you have built up significant equity in your home, then you can opt for a second mortgage loan.
You can use the second mortgage loan proceeds for a variety of purposes such as for home improvements, for debt consolidation programs, for purchasing additional homes, for creating a home equity line of credit, for avoiding private mortgage insurance etc. However, it is to be noted that second mortgage proceeds must be used judiciously. However, there are some risks too. It is always to be kept in mind that you have taken out the second mortgage loan against your home. So our home is at stake. Again, the rate of interest associated with a second mortgage loan is slightly higher than the rate of interest associated with senior loans.