Second Mortgage
The purpose of a second mortgage is to enable the borrower to utilize available equity within their property without breaking the contract of the first position mortgage loan.
Interest rates on this product are generally higher than on a first mortgage due to increased risk incurred by a lender, however, a borrower may take this product to:
Lower interest payments on revolving high interest debt (credit card debt)
Purchase renovation services
To purchase or assist in the purchase of another property
Example scenario:
Jeffrey has a first mortgage on his property for $515.925 at a rate of 4.64% with an LTV of 75% and wishes to consolidate $23,000 worth of credit card debt which has an interest rate of 22.99%.
Rather than breaking the current first mortgage to refinance which may come with an increased interest rate and penalties, a second mortgage product is an available option which is cheaper than paying the high interest rate on a credit card.