Second mortgage (or home equity loan)
A second mortgage is a loan secured by the equity in your property that already has a first mortgage. Generally, considering both loans together– the first and the second, a lender will not loan more than 75 to 80 percent of the home's appraised value. Compared to the first mortgage, the second mortgage will often have higher interest rates and a shorter life term.
The ability to borrow on the equity of your home for various reasons (home improvements, credit consolidation, other current financial needs, college funds, etc) is a big advantage to a home owner. However, because a second mortgage lender is at a greater risk, taking second place to the first mortgage lender, the terms are less flexible. As with the first mortgage, you will be required to obtain an appraisal , verify information such as income, and show credit in good standing.
