A 2nd mortgage is a home loan that is arranged when there is an existing first mortgage on a property. It is classified as subordinate debt, as the lender of the 2nd mortgage only has a right to proceeds from the mortgage collateral after the first lender is made whole. 2nd mortgage interest rates are usually much higher than first mortgage rates to compensate for this increased risk.http://www.investopedia.com/terms/s/secondmortgage.asp

2nd mortgages can be taken out by individuals who want to finance expenditures that may be difficult or overly costly to pay for otherwise. These expenses may include a child's post secondary education, a new car, watercraft, or almost anything else the borrower chooses. They can also be used when purchasing a home to lower the amount of the down payment that is required in cash.http://www.investopedia.com/terms/s/secondmortgage.asp

A Home Equity Line of Credit or HELOC is a revolving credit line that uses a home for security. If a home already has a first mortgage, the HELOC will take second position. While HELOCs can seem attractive due to the lack of an amortization schedule, most of them are also recourse loans. This means that the lender can pursue the borrower personally for the amount of the loan in cases of default. If the lender is not made whole after a foreclosure sale, they have the right to take further action.http://www.helocbasics.com/what-happens-to-a-heloc-in-case-of-default-or-foreclosure/

The content in this page is not a substitute for professional financial advice. Please contact a finance professional before using the information presented here.