Second Mortgage

What is a Second Mortgage and Where to Get One

There are many reasons to look for a second mortgage and many lenders offer a second mortgage loan. Consider some of the differences between a first and second mortgage, and some of the reasons you might want to take out a second mortgage. Then, find a company that can meet your specific needs with the best rates and terms.

A second mortgage is just what the name implies. It's a loan that's separate from your initial mortgage, or first mortgage, on your home. One of the most common reasons to take out a second mortgage is to get the money for a down payment on your loan. For example, a person who wants to buy a $100,000 home will likely be required by the lender to pay $10,000 to $20,000 themselves. Many lenders simply limit their mortgage amounts to no more than 80 or 90 percent of the value or purchase price of the home. If you don't have the $20,000 needed for a down payment, you may take out a separate loan for that amount. This loan is called a second mortgage.

You may also take out a second mortgage during the life of your loan for a variety of purposes. Perhaps you want to do some needed repairs, make some improvements or replace old air conditioning and heating units. If you can afford the payments of a second mortgage on top of the payments of your first mortgage, this might be a good option. This is especially true if the initial loan has good interest rates and terms and there's no real reason for you to refinance that loan.

While you can get a second mortgage from many lenders, your options for a second mortgage may be more limited because of the mortgage to value limitations. Because most lenders limit their amounts to only 80 or 90 percent of the market value of the home, you'll have to find a lender who will loan at a higher rate. Some lenders allow up to 125 percent of the market value of the home. That means that you can take out a second mortgage for the down payment or other purposes, even if it means that you'll have mortgages for more than the value of the home.