A second mortgage is a loan that is in subordinate lien position to another mortgage. In other words, another mortgage came first and recorded an interest in the property in public record. The lender who got there first, is in first lien position and has no barrier to foreclosure. Additionally, if they foreclose, any second mortgage loses its security interest in the property. A second mortgage lender can only foreclose by paying off the first mortgage.

Second mortgages, are riskier loans and, as a result, usually cost more or require an adjustable interest rate. They often carry shorter terms (5 to 20 years) and are generally inexpensive to set up (low-to-no closing costs). A home equity line of credit is a common type of variable-rate second mortgage, but many banks and credit unions also offer fixed rate second mortgages.

These loans are a popular way to free up equity in a home you already own, usually to fund a big-ticket item like college, a remodel or a business venture.