What is a "second mortgage"?

A "second mortgage" refers to a form of borrowing that is secured against a property that already has a primary mortgage. This financial tool allows property owners to tap into their home equity without having to refinance their first mortgage. Since the second mortgage is subordinate to the first mortgage, in cases of default or foreclosure, the primary lender must be paid off before anything goes to the second mortgage lender.

By utilizing this arrangement, homeowners can access funds for various purposes such as home improvements, debt consolidation, or covering unexpected expenses, all while still maintaining their existing first mortgage terms. This transaction is an essential aspect of home financing, and understanding its position in relation to the primary mortgage is crucial for comprehending overall mortgage structures and options available to borrowers.