Second Mortgage Definition: A second mortgage is when a second loan on another property is taken out while the primary, or first mortgage, is still in effect. When a second mortgage goes into default, the original mortgage is used as collateral that can be liquidated if the second mortgage needs to be paid off.
The second mortgage would receive payments only once the first mortgage is paid off, which means the interest rate for the second amount borrowed is higher than the first mortgage rate. To better understand how this process works, many homeowners considering a second mortgage may use a mortgage calculator to budget.
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