A second mortgage is just that – another mortgage taken out on a property which already has a mortgage. With a second mortgage, you are borrowing on the equity in the dwelling. Home equity loans are a type of second mortgage. These mortgages carry highest interest rates than primary mortgages.
Why are interest higher?
That’s because the lender is taking more of a risk. Should you fall on hard times and have to sell your house, the primary mortgage lender is paid off first. If the sale doesn’t generate sufficient funds to pay off all of the second mortgage, that lender might not receive all monies owed.