What is a second mortgage?
Second mortgage is the second loan against your property. As you payoff the first mortgage loan your cashable home equity value increases. A second mortgage loan helps you cash out on this accumulated equity value. Take for example that you have obtained a first mortgage loan for $100,000 and currently you have $60,000 left to pay on the mortgage. The difference amount i.e., $40,000 is the home equity value on which you can purchase a second mortgage loan.
A second mortgage is also what it says – the second loan against a specific piece of property. Consider this example: Let’s say you have a first mortgage on your home. The value is $100,000 and you have a $60,000 balance left to pay on your loan. The $40,000 difference is considered equity, or the part of the home that you own outright. If you wish to further borrow against that $40,000, you would be taking out a second mortgage on the home in order to do so. Why borrow against this equity? In many cases, the interest rate you pay on your mortgage is lower than many other types of loans. Interest is also frequently tax deductible for a first or second mortgage, but not necessarily for a car loan or a credit card. (Consult your tax advisor for more information on tax deductibility and home loans.
