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Second mortgages produce many of the same effects as mortgage refinancing does. People usually take a second out on their home for two reasons:
- If you need extra money for a down payment on your mortgage, then many people choose to take out a second on their home to supplement their closing costs and their down payment.
- If you need extra cash just for some extra expenses, such as college education, home repair, etc., then you might consider taking out a second on your home. Generally, this can be better than just mortgage refinancing because you can end up saving money (possibly) if your second mortgage has a lower interest rate than if you were to completely refinance your mortgage (and possibly lower closing costs). However, because second mortgages are riskier than firsts, because if the first mortgage forecloses, the second mortgage doesn't get paid until the first does (if it does at all), the interest rates tend to be higher. But remember to always shop around for a second mortgage, mortgage refinancing, or any mortgage to obtain the best possible rates that you can.
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