When you need money, sometimes a second mortgage is the answer. Second mortgages, also known as home equity lines of credit (HELOCs) can be used to fund a variety of projects and goals.
The interest rates on Second Mortgages are typically higher than those of First Mortgages. This is primarily due to the increased risk for the Second Mortgage Lender.
Simply, in the event of default, the Second Mortgage holder would only recover his funds from the proceeds after the First Mortgage was satisfied.
Alternately, if your loan-to-value aka LTV is quite low (the ratio of your existing mortgage to the value of the property) and your credit is good, lenders can arrange a line-of-credit in second position, a ‘second mortgage line of credit’ sometimes at the same rates as we would get for a secured line of credit in first position.