The second mortgage term typically refers to a secured loan or mortgage. Normally, this secured loan is subordinate to another loan against the same property.
A property can have multiple loans or liens against it in the real estate. The first registered loan in the county or city registry is called the first mortgage (or first position trust deed). The second registered lien is called the second mortgage. Rarely, in some cases a property can have a third or even fourth mortgage.
Second mortgages are called subordinate. The reason for it is that if the loan goes into default, the first mortgage gets paid off first (before the second mortgage). For this reason, the second mortgages are riskier for lenders and they normally come with a higher interest rate than first mortgages.
A second mortgage typically takes the form of a home equity loan and the two are synonymous (from a financial standpoint). But there is a difference in terminology: a mortgage traditionally refers to the legal lien instrument, rather than the debt itself.
The second mortgage term length varies. Many terms can last up to twenty years on second mortgages. However, repayment may be required in as little as one year (depending on the loan structure).
Occasionally, the second mortgage can be the catalyst to foreclosure when a homeowner defaults on their loan. In these cases, the second lien holder the purchases the primary mortgage and this may still be in good standing. He then forecloses which leaves the homeowner losing their home to the second mortgage lender.
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