Question:

How does a second mortgage work?

Answer:

A second mortgage works the following way - it is a loan establishing a lien on the deed of property on top of the existing first mortgage lien. A second mortgage provides a quick way to cash the built-up equity in your home for any purposes.

A second mortgage may be used in a variety of ways such as consolidating high interest payments, combining bills, and saving on interest as usually it is tax-deductible. The amount to borrow with a second mortgage will depend on the lender and on your credit. Some lenders will allow for 80% of the available equity, others will allow for doing over-equity.

A second mortgage will usually be fixed-rate, simple interest loan and term will range from 2 to 20 years. The second mortgage may amortize fully, or have a balloon payment scheduled at the end.

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Common misspellings: mortage and morgage