Second mortgages are simply additional mortgages taken out on homes. You may wonder why anyone would want to take out a 2nd loan, but in truth, sometimes second mortgages are necessary.

First, let’s determine exactly what second mortgages are. Second or 2nd mortgages are those loans against a home which are second in line with regard to claims against the property should a foreclosure occur.

This means that the lender holding the 2nd loan experiences a higher risk than incurred by the lender who holds the first mortgage. If you experience a foreclosure and the lenders have to sell the home to recoup their money, the first mortgage holder gets all their money first and the money left-over goes to the second holder of debt. The 2nd in line may not get all their money back!

Because of the higher risk experience by second in line mortgages, 2nd mortgages usually mean borrowers have to pay higher interest rates to obtain their second loans. This is only fair since the risk is higher for mortgages that are second. Added risk = added interest.

2nd mortgages are usually smaller than first mortgages. The main mortgage which covers the majority of the price of a home purchased is always the first rather than the second mortgage.

Lenders normally lend 80 – 90% of the value of the home purchased. Seldom will a lender loan 100% of the value and when they do, there are usually things like Private Mortgage Insurance resulting in added expenditures to the mortgagee.

One case where 2nd mortgages can be truly helpful to home buyers is when a home is being purchased before the previous residence is sold. Perhaps the former residence has $20,000 in equity and that equity is necessary to purchase the bigger, better home desired. Second mortgages, are perfect for these situations, and often are the only solution.

In cases like these, the home buyers, while awaiting sale on their former residence, obtains a 2nd mortgage for the amount of the difference required. This is sometimes called a “bridge loan” since the home buyer will repay the outstanding balance on the second debt once their old home sells. This is a common use of 2nd home mortgages.

Perhaps a home was purchased some years ago and the owners have built quite a bit of equity in the home by having paid a down payment and then paying their monthly mortgage payments. Now, they have been hit with the necessity of a major home repair or other large expenses and need to access money. A 2nd mortgage, can help them over this hump.

There are risks to obtaining second or additional home mortgages. You will have to pay first and second monthly mortgage payments. You must study your budget and be certain you can pay both the first and 2nd payment on time. Taking chances with your home is risky, so be sure before entering into a 2nd loan against your home.

Your home probably represents the largest savings account you will ever own. For some lucky people, this isn’t true. The vast majority, however, find saving a sum of money nearly equal to or greater than their home value to be almost impossible! Second mortgages can be viewed as withdrawals from these main savings accounts. Obtaining second mortgages will require that the home owners have built reasonable home equity. Once the 2nd obligation is repaid, the savings account “balance” is replenished.

Do not enter into 2nd home mortgages lightly! Look for other options before going into a second debt against your home. Perhaps, if your financial need is reasonably small, a signature loan will provide the needed funds. Talk to your financial advisor before jumping the gun and signing on the dotted line for any 2nd home loan.

If you find an additional loan, or a 2nd home loan, is absolutely necessary for your particular situation, look for the lender who offers the lowest possible lowest possible interest rate. There are lenders that specialize in second home mortgages that can help you.

Online lenders can be easily found who provide 2nd home mortgages easily. You can apply online and get a rapid response regarding approval. Your local bank can be another great source of 2nd home mortgages as well. If you require a second home loan and have a good credit record, you will probably have little trouble obtaining this type of loan.