What is a second mortgage and why would you possibly need one?

With real estate values at record highs, more and more people are turning to second mortgages to get over the financial hump.

A second mortgage is the second loan on a piece of real estate that is already mortgaged. Second mortgages are subordinate to the first mortgage. In the event of default, a second mortgage lender must wait in line to be paid, after the primary mortgage lender .

Second mortgages terms are are typically shorter than the primary term and are commonly written at a higher rate of interest, due to the inherent risk of the loan.

Home equity loans and lines of credit are typically second mortgages. While folks take out second mortgages for many reasons, some of the most common reasons include unlocking equity to pay off credit card (and other higher interest rate debt), undertaking home improvement projects, and taking care of pressing family issues (education, medical, etc.), while maximizing tax benefits.

While the second mortgages are extremely popular at the moment, things have the potential to get very scary very quickly should the real estate bubble burst …