What Is a Second Mortgage and How Does It Work?

AUTHOR: (SizeLimitingPyMap: {bio=<div style="color: #374151; line-height: 1.75;">
<div style="color: #1d1c1d;">
<div style="color: #1d1c1d;">
<div style="color: #1d1c1d;">
<div style="color: #1d1c1d;">
<div style="color: #1d1c1d;">
<div style="color: #1d1c1d;">
<div style="color: #1d1c1d;">
<div style="color: #1d1c1d;">
<div style="color: #1d1c1d;">
<div style="color: #1d1c1d;">
<div style="color: #1d1c1d;">
<div style="color: #1d1c1d;">
<div style="color: #1d1c1d;">
<p><span>Bennett Leckrone is the editorial manager and an analyst for Lower. He specializes in making complicated mortgage topics accessible for consumers. That includes both in-depth product guides and in-depth analysis on what economic moves mean for homebuyers and refinancers.</span></p>
<p><span>He was previously a business reporter with a focus on higher education and fintech at BestColleges. In that role, he reported on the development of fintech and AI curriculum, as well as the rapidly changing nature of finance education. He also wrote guides to help business students navigate AI and online education.</span></p>
<p><span>He also reported on state politics at Maryland Matters, with a focus on how policy affected people and businesses. He holds a bachelor of science in journalism degree from Ohio University.</span></p>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>, hs_child_table_id=0, hs_created_at=1770043933978, hs_created_by_user_id=83124684, hs_deleted_at=0, hs_id=206641338162, hs_initial_published_at=1770044043289, hs_is_edited=false, hs_name=Bennett Leckrone, hs_path=bennett-leckrone, hs_published_at=1770998795717, hs_updated_at=1770652567617, hs_updated_by_user_id=85123122, name_first_last=Bennett Leckrone, profile_picture={url=https://19577492.fs1.hubspotusercontent-na1.net/hubfs/19577492/Bennett%20Leckrone%20Cropped%203.jpg, width=2048, height=1638, altText=Bennett Leckrone Cropped 3, fileId=207187231860, type=image}, tags=[{id=1, name=writer, label=Writer, isHubspotDefined=false, labelTranslations={}, type=option, createdAt=1770043811028, createdByUserId=83124684, updatedAt=1770043811028, updatedByUserId=83124684, order=0}, {id=2, name=reviewer, label=Reviewer, isHubspotDefined=false, labelTranslations={}, type=option, createdAt=1770043811028, createdByUserId=83124684, updatedAt=1770043811028, updatedByUserId=83124684, order=1}, {id=3, name=expert, label=Expert, isHubspotDefined=false, labelTranslations={}, type=option, createdAt=1770043811028, createdByUserId=83124684, updatedAt=1770043811028, updatedByUserId=83124684, order=2}]})

REVIEWER: (SizeLimitingPyMap: {bio=<p><span>Neel Patel is a mortgage industry professional with more than a decade of hands-on experience across loan origination, customer experience, sales operations, and strategy. He has worked at every stage of the mortgage lifecycle, from advising individual borrowers to leading teams of loan officers. </span></p>
<p><span>As an expert reviewer, Neel evaluates mortgage and personal finance content for accuracy, clarity, and real-world applicability. He specializes in ensuring information reflects how lending actually works in practice so consumers can make confident, informed decisions.</span></p>, hs_child_table_id=0, hs_created_at=1770998587713, hs_created_by_user_id=85123122, hs_deleted_at=0, hs_id=207521716567, hs_initial_published_at=1770998795717, hs_is_edited=false, hs_name=Neel Patel, hs_path=neel-patel, hs_published_at=1770998795717, hs_updated_at=1770998733653, hs_updated_by_user_id=85123122, name_first_last=Neel Patel, profile_picture={url=https://19577492.fs1.hubspotusercontent-na1.net/hubfs/19577492/Neel%20Patel%20Cropped%204.jpg, width=1638, height=2048, altText=Neel Patel, fileId=207528140173, type=image}, tags=[{id=2, name=reviewer, label=Reviewer, isHubspotDefined=false, labelTranslations={}, type=option, createdAt=1770043811028, createdByUserId=83124684, updatedAt=1770043811028, updatedByUserId=83124684, order=1}]})

Written by Bennett Leckrone

Reviewed by Neel Patel

Our Editorial Standards

A second mortgage is another loan that uses your home as collateral while you still have an outstanding primary mortgage.

Home equity loans and HELOCs (home equity lines of credit) are two of the most common forms of second mortgages. Both of those loans are ways to convert your equity into cash without changing your original mortgage.

How Does a Second Mortgage Work?

A second mortgage runs alongside your first mortgage, with its own balance, interest rate, and monthly payment. Your original loan remains unchanged.

A second mortgage does not replace your existing loan. That means refinances, including cash-out refinances, aren’t second mortgages. That means a second mortgage is a strong option if your first mortgage has a low interest rate you don’t want to give up.

Let’s break down how the two most common second mortgages work:

Home equity loan

A home equity loan is a lump-sum second mortgage, usually with a fixed interest rate and predictable monthly payments. It’s usually best for one-time, large expenses and borrowers who want payment certainty.

HELOC (home equity line of credit)

A HELOC is a revolving line-of-credit second mortgage. You borrow only what you need and pay interest only on the amount drawn. HELOCs usually have draw periods of between three to 10 years where you can borrow money, and repayment periods of between 10 to 20 years where you pay back what you borrowed. During the draw period you might only pay interest on what you owe.

HELOCs are best for phased expenses and borrowers who want flexibility.

Home equity loan vs. HELOC

Feature	Home equity loan	HELOC
Payout	Lump sum	Revolving credit
Interest rate	Fixed	Usually variable
Payments	Predictable	Varies by usage
Ideal use	Single major purchase	Flexible, ongoing costs

Common Uses and Benefits of Second Mortgages

Homeowners use second mortgages for practical, often strategic reasons.

Common uses

Home improvements that may increase property value
Debt consolidation, such as paying off high-interest credit cards
Education, medical expenses, or business startup costs

Benefits

Lower rates than unsecured loans, since your home secures the debt
Access to equity without refinancing, preserving your original mortgage terms
Flexible structures, from fixed-rate loans to revolving credit

Risks and Costs to Consider

Second mortgages can be powerful tools, but they aren’t risk free.

Key risks

Foreclosure risk: Missing payments can put your home at risk, since it secures both loans.
Higher interest rates: Second mortgages generally have higher rates than primary mortgages.
Reduced future equity: Borrowing now can limit options to sell, downsize, or relocate later.

Typical costs

Closing costs: Typical closing costs can run 2% to 5% of the loan amount, according to Freddie Mac, although that varies by lender.
Upfront fees: Appraisal, legal, and lender fees may total around $3,000.

Tax note: Interest may be deductible if funds are used for qualified home improvements, but tax rules vary—consult a tax professional.

Who Qualifies for a Second Mortgage?

In general, you’ll need built-up equity in your home, good credit, and an acceptable debt-to-income (DTI) ratio to qualify for a second mortgage.

Lenders typically used a combined loan-to-value (CLTV) ratio to determine eligibility for a second mortgage. That means that the second mortgage is combined with your first mortgage and weighed against your total home values. Many lenders have caps at 80% loan to value, although that requirement varies.

You’ll likely need several documents to apply, including:

Proof of income (pay stubs, W-2s, tax returns)
List of current debts and assets
Recent mortgage statements
Home appraisal (in many cases)

The Bottom Line

A second mortgage is an additional loan that uses your home as collateral in addition to your primary mortgage. Home equity loans and HELOCs both count as second mortgages.

A second mortgage is a powerful financial tool because it lets you tap into your home equity, but you’ll need to meet lender requirements and have sufficient equity to qualify.

Frequently Asked Questions