Saskatoon Mortgage Broker shares article – A Second Mortgage, What It Is And How It Works?

Home Equity Management – March 25, 2016

What Is A Second Mortgage?

A second mortgage is when an additional loan, with a different mortgage lender, is taken on a property that is already mortgaged. When the mortgage holder makes payments on the second mortgage, they must also continue to make payments on the primary mortgage.

Why Are Interest Rates Higher On A Second Mortgage?

The lender for the second mortgage takes on more risk than the provider of the first mortgage because they would be in second position on the property’s title. For example, if a homeowner defaults on their payments and the property is then taken into possession, the lender of the original (first mortgage) would be paid out first. The lender of the second mortgage is at a higher risk of not being paid out in full, and thus, due to this additional risk, second mortgage rates are almost always higher than the rates of a principal mortgage.

To read more, including the advantages and disadvantages of a second mortgage, click here

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