The term “second” means that the loan you are taking out does not have priority on your home if for some reason you can’t pay it back on time. In all cases the initial mortgage on your home would be paid before any money would go toward a second mortgage payment. With that being said, the next question is why in the world someone would put their home up as collateral for money. Well, the answer is that you shouldn’t unless you are in a situation where you need a large amount of money fast.

The second mortgage loan against a specific piece of property. Consider this example: Let's say you have a first mortgage on your home. The value is $100,000 and you have a $60,000 balance left to pay on your loan. The $40,000 difference is considered equity, or the part of the home that you own outright. If you wish to further borrow against that $40,000, you would be taking out a second mortgage loan on the home in order to do so.

When a person borrows money against their home that’s a large chunk of change being used for collateral and it also allows the borrower to get a bigger loan. There are some disadvantages to second mortgages such as the fact that you are taking a chance with your home should something happening and you have trouble paying the second mortgage back.
Take a look at the interest rate on a 2nd mortgage loan too. You can probably expect the rate to be a bit higher because it is riskier to the lender who knows that if a default occurs the primary mortgage gets paid first and then the second mortgage. You can also be choosy about a second mortgage so check more than one source when trying to make a decision. Watch out too for balloon payments, which is a payment that starts out low and rises as time goes by. If possible, choose a fixed interest rate. Also be aware that second mortgages refinance , like any other loans, have additional closing costs. There are the appraisal fees, application costs and other closing costs that can be as random as title searches.

The Benefits of a Second Mortgage Loan:

We have already stressed the importance of carefully weighing the available options in deciding whether or not to take on a second mortgage. In this section we will outline the benefits of a second mortgage. Although a second mortgage may increase the amount the homeowner pays in the long run, there are other worthwhile benefits to this type of mortgage. Some of these benefits include:

• Debt consolidation

• Tax advantages

• Home improvement possibilities

• Favorable interest rates

Debt consolidation is just one of the many advantages to a second mortgage. A second mortgage is typically secured based on the equity in the home but it can often be used for any purpose. This gives homeowners the opportunity to consolidate several debts including high interest credit card debt, under the umbrella of a bad credit second mortgage. Debt consolidation can greatly increase monthly savings by allowing the homeowner to repay high interest debt at the lower interest rate associated with the second mortgage. See If You Qualify

There are also tax advantages to securing a second mortgage. As we mentioned credit card debt and other debts may be consolidated under a second mortgage. This is beneficial because tax laws may enable the homeowner to deduct the interest on their second mortgage.
The opportunity to make improvements to the home also exists with a bad credit second mortgage. As previously mentioned, a second mortgage can be used for a variety of purposes. Many homeowners take out a home equity line of credit which enables them to cash out refinance on the equity of their home for purposes such as home improvement.

If you need to refinance your mortgage and have a bad credit or poor credit learn how to get bad credit mortgage refinance & also learn about how to apply for loan modification .