Definition
Additional mortgage on property secured after first mortgage, with higher risk/rate.
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Second mortgages used for down payment assistance. Higher interest rates than first mortgage. Unsecured by first mortgage. Lender receives payment only after first mortgage satisfied. Risk justifies higher rates. Second mortgage for improvement financing common. Equity lines of credit (HELOC) are second mortgages. Refinancing removes second mortgage. Qualification tighter for second mortgage. Strategic use possible. Higher rates reflect risk.
Pro Tip
Second mortgages have higher rates; evaluate cost-benefit vs. higher down payment.
Example
Second mortgage at 6% financed down payment assistance.