Before choosing what kind of a mortgage to get, you should understand the difference between its various types. According to the financial terms, a second mortgage is considered to be a type of a home equity loan.
When you get the second mortgage, you receive a fixed amount of money and you have to repay it on a determined schedule. Unlike refinancing, you can’t replace the first mortgage with the second one. The second mortgage often requires a fixed interest rate and 15- to 30-year repayment period.
Like the first mortgage, the interest rate and points (if necessary) will depend on your payment history, the price of your home, and the interest rate you pay now. Mind that the interest rate may be higher than that on your first loan, while the fees are usually lower.
When choosing the home equity loan, you use your first home as collateral. You can only use the money you have already paid towards covering the first mortgage.
Read our useful tips for getting the second mortgage for the more reasonable decision.