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Second mortgage
Refers to a secured loan that is taken out with the same property of security as a previous loan.
If you have a real estate then you may have multiple loans or liens for the same property.
The first loan you have is called the first mortgage and therefore the second loan is called second mortgage. Is some cases a property might have three or four mortgages but that's very rare.
A second mortgage is riskier for the lender since it's the first mortgage that will be paid back first if you fail to make your payments. Since it's more risky the second mortgage normally comes with a higher interest rate than the first mortgage.
Term length of a second mortgage
You can not really say that there is a certain length of a second mortgage since it can vary, but as a rule of thumb you can say that the term can be up to 30 years. But sometimes one year is the repayment time.
What do the lenders look for?
The lenders normally considers the following things when they decide if you are allowed to take out a second mortgage or not:
- Significant equity in the first mortgage
- The debt to income ratio should be low
- Good credit score
- An employment history that looks good