Also known as a junior-lien loan, a second mortgage refers to a loan obtained using an existing home with a mortgage as collateral. It is referred to as such because if you don't repay your mortgage and your home gets sold off, the initial mortgage receives top priority, and the second mortgage may remain uncleared. That explains why a second home mortgage interest rate is usually higher.
Homeowners can leverage their home equity to get a second mortgage loan, and some examples of these loans include a home equity loan and a home equity line of credit (HELOC).
Second mortgages feature several advantages and drawbacks and may not suit every homeowner. Situations that may warrant an additional mortgage include having credit card debt or revolving expenses that you need access to cash to cover.