Second Mortgage

AAA

DEFINITION of 'Second Mortgage'

A type of subordinate mortgage made while an original mortgage is still in effect. In the event of default, the original mortgage would receive all proceeds from the liquidation of the property until it is all paid off. Since the second mortgage would receive repayments only when the first mortgage has been paid off, the interest rate charged for the second mortgage tends to be higher and the amount borrowed will be lower than for the first mortgage.

INVESTOPEDIA EXPLAINS 'Second Mortgage'

Since the first mortgage is used as a loan for buying the property, many people use second mortgages as loans for large expenditures that may be very difficult to finance. For example, people may take on a second mortgage to fund a child's college education, or to purchase a new vehicle. Second mortgages also can be a method to consolidate debt by using the money from the second mortgage to pay off other sources of outstanding debt, which may have carried even higher interest rates.

RELATED TERMS
  1. Cross Collateralization

    The act of using an asset that is currently being used as collateral ...
  2. Consolidate

    The combining of assets, liabilities and other financial items ...
  3. Default Risk

    The event in which companies or individuals will be unable to ...
  4. Lien

    The legal right of a creditor to sell the collateral property ...
  5. Subordinated Debt

    A loan (or security) that ranks below other loans (or securities) ...
  6. Mortgagor

    An individual or company who borrows money to purchase a piece ...
Related Articles
  1. The Benefits Of Mortgage Repayment
    Home & Auto

    The Benefits Of Mortgage Repayment

  2. When (And When Not) To Refinance Your ...
    Home & Auto

    When (And When Not) To Refinance Your ...

  3. How To Outsmart Private Mortgage Insurance
    Home & Auto

    How To Outsmart Private Mortgage Insurance

  4. Battling Foreclosure: The HOPE NOW Alliance ...
    Options & Futures

    Battling Foreclosure: The HOPE NOW Alliance ...

comments powered by Disqus
Hot Definitions
  1. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  2. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  3. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  4. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  5. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  6. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
Trading Center