Mortgage – Home Equity Loans

second mortgage , also known as junior liens, are second loans secured against a property only the primary mortgage and not the owner’s home. Depending on when the second mortgage is derived, usually the second mortgage will be treated as either a second primary mortgage or a piggyback second mortgage to that principal mortgage. Both types of second mortgage have distinct purposes and requirements.
A second mortgage can be used for any number of reasons. Some people borrow money to make home improvements that increase the value of their home. Others borrow money to pay down other debt, such as credit card debt. Home equity lines of credit (HELOCs) allow a borrower to take out a loan against the equity in his or her home when other forms of credit are unavailable.
A borrower can use his or her home equity loans to consolidate existing debt. This allows the borrower to pay off all the debts with one payment. HELOCs also help to keep a person’s overall debt obligation to creditors down. Consolidating debt means paying off a large number of smaller loans instead of making several larger payments. This helps a person to pay off his or her overall debt faster and reduces the total amount of interest he or she will have to pay over the life of the loan. One of the biggest advantages of HELOCs is that they do not restrict a person’s access to credit.
In order to secure a second mortgage, a borrower must pledge the real estate on which he or she intends to secure the loan as collateral. If the borrower defaults on his or her second mortgage, then the lender has the right to foreclose on the real estate. The first loan, the primary loan, will be paid to the lender after the foreclosure process is complete.
The interest rates of second mortgages are typically less than the interest rates on first mortgages. This is because the lenders bear only the administrative costs in addition to offering the second mortgages. Second mortgages can be up to 30 years in duration. Most second mortgages also come with adjustable interest rates, although this varies depending on the specific type of loan and the lender.
Many people choose to borrow money against their homes’ equity in order to finance education, medical bills or any other expenses. Because second mortgages are secured loans, they come at a cost. Usually the cost of the loan outweighs the value of the property pledged as security. People who borrow against their homes’ equity have to be prepared to give a significant amount of up-front money.