A second mortgage is a loan made in addition to the homeowner’s primary mortgage. HELOCs are often used as second mortgages. Second mortgages often have slightly higher interest rates than first mortgages but lower interest rates than a personal bank loan or credit card payment.

Can you have a mortgage with two different lenders?

A To answer your first question, it is perfectly possible for you to take out a second mortgage with a different lender to finance your extension. And if you can definitely get a better deal than with your current lender, it would seem silly not to.

When does a second mortgage go into foreclosure?

The loan is known as a second mortgage because your purchase loan is typically the first loan in line to be repaid if your home goes into foreclosure. 1  This means that if a worst-case scenario occurs and you can no longer pay your mortgage and the lender sells your home, your first mortgage would be paid first.

What are the risks of having a second mortgage?

Risk of foreclosure: One of the biggest problems with a second mortgage is that you have to put your home on the line. If you stop making payments, your lender will be able to take your home through foreclosure, which can cause serious problems for you and your family.

What kind of loan do you get with a second mortgage?

Second mortgages are a lien taken out on the amount of your home that you own, which is called equity. When you take out a second mortgage, your lender may give you a single lump-sum home equity loan or a revolving line of home equity credit.

What happens if you default on a second mortgage?

In other words, your lender has the right to take control of your home if you default on your loan. When you take out a second mortgage, a lien is taken out against the portion of your home that you’ve paid off.