Second Mortgage is a home loan subordinate to the first mortgage in the order of lien placement. Mortgage loans are recorded in the local county records. The first loan recorded is referred as the first mortgage, and the second lien recorded is the "Second Mortgage". If a property goes into foreclosure and the proceeds from the foreclosure sale of the home is used to satisfy the liens, first mortgage is paid off before the second lien is satisfied.With a HELOC you will not recieve all of the money at once. You will be able to draw on the available funds and pay them off over and over again, much like a credit card, only with a much better interest rate. There may be an annual fee on your HELOC.
Second mortgages can be used to tap into the equity you have in your home, much like a cash-out refinance.
For example, if you have a great fixed rate on your first mortgage, you may not want to change it. A Home Equity Loan or a HELOC (Home Equity Line of Credit) would be a good option.
A home equity line of credit (HELOC) allows you to access the equity in your home as necessary. In most cases you are given a checkbook that will pull funds directly from your home equity account. The amount of your minimum payment will fluctuate with your current balance, and will typically carry an interest rate that will float with prime.
Typically, second mortgages carry higher interest rates than standard mortgages. If you plan on purchasing a home with less than a twenty percent down payment, it may be suitable for you to arrange the financing with a small second mortgage.
With a Home Equity Loan, you will receive the amount you borrowed in one lump sum. As long as your Home Equity Loan has a fixed rate, your payments will not change for the life of the loan.
