You must have often heard about the term “Second Mortgage” and have wondered about its real meaning. The real meaning of this term is “Home Equity Loan” which is a type of loan taken by homeowners for using it for renovation, extension, repairs or any other type of expenses for their homes.
The home equity loan, or the second mortgage as it is commonly known, requires that you should keep your house as a collateral security just as a normal home loan. There are many kinds of home equity loans which may be used for paying bills, home repairs and even buying furniture. But you will need outstanding credit if you want approval for these types of loans.
Through a second mortgage or the closed end type home equity loan, you get a big amount of money almost immediately, but you cannot get another loan, until and unless the second mortgage is fully cleared.
The amount of the second mortgage will depend on a number of factors such as the value of your home, your credit score, yearly income and such other things. An open ended home equity loan allows you to borrow money whenever you require. These types of loans have an adjustable rate and can be repaid in 10 to 30 years.
But why are these loans known as “Second Mortgages”. These types of loans are known as second mortgages because you are adding another loan to your account. These loans also use your house as a collateral security. You are adding another monthly installment payment for repaying this loan in addition to the other loan that you have already taken. However, you should be careful about your repaying capacity before you take a second mortgage, as this will help you a lot of problems in the future.