All you need to know about Second Mortgages

02/09/2019 | 3 min


What are second mortgages?

A second mortgage is a second charge over a property that already has another mortgage on it. The mortgages are ranked in the order in which they were lodged.

Second mortgages are riskier to lenders than first mortgages. This is because in an event of a foreclosure sale, the first mortgage gets paid off first. A second mortgage also comes with higher interest rates than first mortgages given the risk to the lender.

How do second mortgages work?

If you’re inclined to get a second mortgage, it is essential to understand how much equity you have in your home.

Once you qualify, you will need to familiarise yourself with how a second mortgage works when you want to pay it back? The terms for a second mortgage typically range from 6 months to two years. During which you’re normally required to make just the interest payments. At the end of your mortgage term, you need to pay back the total principal amount.

You typically need an “exit strategy” or “repayment plan” to repay the principal at the end of the term. This can be sale of the property, refinance or other means.

Advantages of second mortgages:

  • Equity / cash out: Second mortgages allow borrowers to borrow against the equity in their property for purposes such as renovations, business or personal use.
  • Speed: If you’re looking for a fast alternative second mortgage lender can usually settle within days not months.
  • Refinance alternative: If you’re looking for an alternative to refinancing, second mortgage can provide that. It may involve break costs, exit fees or other legal fees.

Disadvantages of second mortgage:

  • Cost: One of the drawbacks of second mortgage are the cost associated with obtaining it, such as origination cost and interest rates etc.
  • Risk Foreclosure: Since the second mortgage is secured against your home, if you default on the loan, your lender can take your home through foreclosure.
  • Taking on more debt: With second mortgages, you will be managing two loans. Make sure you can afford to make repayments on both your mortgages before you apply for a second mortgage.

Tips on getting a second mortgage:

  1. A second mortgage is a big undertaking and this decision shouldn’t be taken lightly.
  2. Ensure you’re financially equipped to make your payments on time and manage both your mortgages.
  3. Get a quote from different lenders before you apply for the mortgage. This will enable you to compare your options.
  4. Have all your documentation ready before hand for a hassle-free process.

Learn more about our second mortgage loans or get an obligation free express quote today

Property loans for all purposes.

We lend to individuals and companies looking for short to medium term loans for any purpose. We take a common sense approach to lending and can often assist when the banks cannot.

  • Purchase, refinance or cash out.
  • Urgent bridging loans and short term loans.
  • Business and personal loans.
  • Vacant land.
  • Cash out & ATO Debts.
  • Commercial property.
  • Non-residents, bad credit or self employed.


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