Second mortgage.

In plain English

A second mortgage is a loan secured by a home that already has a primary mortgage on it. It taps the equity you have built and comes in two main forms: a home equity loan, paid out as a lump sum at a fixed rate, and a home equity line of credit, or HELOC, that you draw from as needed. It is called second because if you default and the home is sold, the first mortgage is repaid before the second. That extra risk to the lender usually means a higher interest rate than the first mortgage.

01Why it matters

A second mortgage turns home equity into spendable cash but adds another payment and puts the home at risk, so the rate and repayment terms deserve close attention.

02The math, step by step

Your home is worth 400,000 dollars and you owe 250,000 dollars. A second mortgage might let you borrow up to about 70,000 dollars against your equity, adding a second monthly payment secured by the house.

03What this is NOT

04Receipts

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