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Second Mortgage

Second mortgage is referred to as subordinate mortgage. It is a form of secured loan. Any property can have multiple liens or loan against it. The loan which is registered first is called the first mortgage and loans which are taken after the first mortgage is called Second Mortgage. A property can have up to fourth mortgage.

In event of default the first mortgage gets paid of first and therefore the risk of a second mortgage is higher and hence it comes with a higher interest rate.

Generally the term of second mortgage varies, it can normally last up to 20 years, and repayment period can be as small as one year.

Second Mortgage is also riskier to the borrower in the sense that in event of default of the second mortgage, the lender can purchase the first mortgage and become the owner of the property and hence the homeowner losses the home.

Second Mortgages are used for many purposes, some of the common ones are avoiding private mortgage insurance, debt consolidation, and home improvement and for purchasing additional homes.

There are many disadvantages of the Second Mortgage, the main being the loss of home in event of default, high interest rates, high second mortgage fees.

Second mortgages are available with a number of lenders, but it is wise to choose a lender whom you know already. Like bank or credit union. The other option is to choose the lender with whom the first mortgage of the house rests to save fees.

Second Mortgage has its own advantages and disadvantages, opt for it and get the best deal.