second mortgages

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second mortgages

 

11.  Second mortgages

 

Second mortgages are mortgages on a property that are less secure for the lenders than the primary mortgage. The lender of a primary mortgage is the first one to collect their money in the event of default and foreclosure. The lender holding the second mortgage note gets to collect only if the primary note holder gets their money. Because the risk of loss is greater for a second mortgage holder, the mortgage interest rate on the second mortgage will be higher. The closer the total of the first and second mortgages approaches the appraised value of the property, the higher the second mortgage interest rate will be. The interest rate on a second mortgage will be greater than that of the primary mortgage because of the second mortgage lender’s greater risk exposure.

Second mortgages are normally taken out for a fixed amount and fixed period of time, like ten or fifteen years, unlike home equity credit lines which are usually revolving credit accounts.

 

 

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