What Is a Second Mortgage or Home Equity Loan?
A second mortgage, also known as a home equity loan, lets homeowners borrow against the equity they've built in their property. Unlike refinancing, this loan is added on top of your existing mortgage and paid in monthly installments with a fixed interest rate.
✅ How a Second Mortgage Works
A second mortgage is secured by your home’s equity — the difference between your home’s value and what you owe on your first mortgage. You receive a lump-sum payment, then repay it over a set term, usually 10 to 20 years.
- Uses your home as collateral
- Fixed interest rate and monthly payment
- Often used for renovations, debt consolidation, or tuition
💡 Second Mortgage vs. Refinancing
Refinancing replaces your existing mortgage with a new one, while a second mortgage adds a separate loan. If you already have a good rate on your first mortgage, a home equity loan may be a better option than refinancing.
- Refinancing replaces your old loan
- Home equity loan keeps your current mortgage intact
- Interest may be tax-deductible if funds improve the property
📉 Risks and Considerations
- Failure to repay could lead to foreclosure
- Closing costs and appraisal fees may apply
- Reduces total equity available for future borrowing
Compare your options carefully and consider alternatives such as a HELOC for more flexibility.
🏠 Ready to sell instead of borrowing against your equity?
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