If you need to borrow money for a child’s college tuition, home renovations or any other purpose, a second mortgage is a quick way to tap into your home equity. A second mortgage no longer carries the shame or negative stigma it once did. In fact today it is quite the contrary with the second mortgage being valued as legitimate borrowing strategy.

What is a second mortgage? A second mortgage is another name for a home equity loan. It is called a “second” mortgage because it takes second place to a loan or mortgage already secured against the property (also called the first mortgage). It is second in line. If the borrowers default on the loan and the home is seized and sold, the lender who holds the first mortgage would be paid out in full and then the lender who holds the second mortgage would receive his money. The amount available to be borrowed is the difference between the home’s current value and the amount outstanding on the first mortgage. This usually determined with an appraisal

Because the issuer of the second mortgage is in a riskier position, the interest rate will be higher than on a first mortgage. It is therefore always recommended to talk to the lender who holds your first mortgage and discuss with them the options of simply doing a mortgage refinance and adding on the additional funds needed. Also shop around on the Internet for mortgage refinance offers with low rates that will take care of paying out your first mortgage and also give you the additional cash you require.

Why do people get them? People take out second mortgages for all sorts of reasons. Essentially they require general access to additional funds. This could be for a child’s college education, home repairs, renovations or a debt consolidation. It is a good way to access the asset value of your home and have it start working for you. A second mortgage or home equity loan is better than using unsecured credit and with higher interest rates.

A second mortgage is often easier to get because it is secured by your home, which you already own. Additionally the interest paid on a second mortgage is normally tax deductible. This is a significant benefit. Also the fees and costs are generally lower or in some circumstances waived all together.

So before signing more unsecured, high interest credit consider a second mortgage or home equity loan and get the lowest rate possible.