How Does a Second Mortgage Work?

For those who are only familiar with the usual home mortgage loan, they might be wondering what a second mortgage is. In simple terms, this is another loan that is secured against your home but it does not have the same priority as the first mortgage loan when it comes to getting the proceeds from the sale of your home in case of a foreclosure.

What this means is that the first mortgage will get paid first and if there is any money left over then it goes to the second mortgage holder. What this also means is that a second mortgage will have a higher interest rate because of the inherent higher risk of the loan. Read more