An additional mortgage taken out on a property that already has an existing first mortgage. The second mortgage is subordinate to the first, meaning if you default, the first mortgage lender gets paid before the second. Because of this higher risk, second mortgages carry higher interest rates and are often provided by alternative or private lenders.
Why It Matters
A second mortgage can provide access to your home equity without breaking your first mortgage, which is useful if your first mortgage has a great rate you want to keep. However, the higher interest rates and additional monthly payments add financial pressure. Consider all alternatives, including a HELOC or refinancing, before going this route.
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