How does a 2nd home mortgage work?

Answer 1

Let's start off assuming your home is worth $150,000.
You currently have a mortgage of $50,000.
That leaves you with $100,000 equity (ownership) in the home.
You need cash for whatever reason, so you take out an additional mortgage on your home, for up to whatever amount you have in equity (just be careful, if you go over 80% of your home's value, most lenders will require you to purchase PMI - private mortgage insurance, which can be costly). That second mortgage will be totally separate from your first, different interest rate, possibly even a different lender. You can pay off one without paying off the other.
It's obviously a lot more detailed than this, but any mortgage broker can give you the lengthly explanation.

Answer 2

If you are using a second home mortgage to make a first time home purchase, it works quite like a credit card account. Basically, you are putting the 20% that you would normally put down in cash to avoid mortgage insurance on another mortgage aka credit. It generally has a higher rate than typical 30 year mortgage rates (almost 9% or more) and runs for a shorter term (15 years instead of 30 years).

Answer 3

It's like another mortage, except is comes second when paid off. You have two mortages on your home. It's probablly better to get an equity loan and cover first mortage (include first and second) together if you can. It's more likely, you could get better interest rates. If you get two mortages one could be say 8 percent and the other 9 (examples) percent then you are paying l7 percent on your home. If you could, and have the ability to combine,I'd check with bank or mortage company and see what best suites my budget. Oh, I should have told you if you are able to get equity mortage and combine both you could/might get off with possible 7-8 percnet. Note. I have no idea what mortage rates are. Good Luck!

Answer 4

As long as you can afford the payment and you are exchanging a high interest debt for a lower % rate of making improvements that will jack up the value of the property!!