A second mortgage is another loan on the same property as the first loan. If ever a loan that has more than one mortgage on it and it is not paid off, then the first mortgage is paid first. You can have more than one loan on one property but the more you have the higher interest rate and the more risky it is for the lender. The difference between second mortgage and refinancing is that you have two loans with a second mortgage, with refinancing you pay off the first loan, and add it to the loan you are getting so you will only have one loan. Why would someone want a second mortgage? A few reasons are:
- Home Improvements
- College Tuition
- Debt Consolidation
- Purchase more homes
- New baby
There are many other reasons to do a second mortgage but there is also a disadvantage to it as well. You will be adding another debt and you will have a higher interest rate. Make sure it is well worth it, to do this.