What is a second mortgage and how does it work?

A second charge mortgage allows you to use any equity you have in your home as security against another loan. It means you will have two mortgages on your home. Equity is the percentage of your property owned outright by you, which is the value of the home minus any mortgage owed on it.

Correspondingly, what does it mean to have a second lien?

Definition. A debt that places its holders second in line in the case of bankruptcy or default. Second lien debt holders receive compensation from property or other collateral after first lien debt is covered, making this type of loan a riskier investment.

What is a second lien on a car?

A lien on a car implies that the title of the vehicle is owned by the loan provider until the amount of the loan is completely paid off. If you financed the vehicle and still owe money on it, the bank or finance company has the first lien against it—then the debt collector has the second.

Is a second mortgage a lien?

A second mortgage is a lien on a property which is subordinate to a more senior mortgage or loan. Called lien holders positioning, the second mortgage falls behind the first mortgage. This means second mortgages are riskier for lenders and thus generally come with a higher interest rate than first mortgages.

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