Business Glossary

advancing funds to a borrower that are secured by real estate previously pledged in a first mortgage loan. In the case of default, the first mortgage has priority of claim over the second.

A variation on the second mortgage is the home equity loan, in which the loan is secured by independent appraisal of the property value. A home equity loan may also be in the form of a line of credit, which may be drawn down on by using a check or even a credit card.

mortgage that is subordinate to other mortgages -for example, a second or a third mortgage. If a debtor defaults, the first mortgage will have to be satisfied before the junior mortgage.

mortgage that is subordinate to the lien created by a first mortgage, but senior to subsequent liens. Sometimes called a second trust, a second mortgage normally has a repayment term much shorter than a first mortgage, a fixed amortization schedule, and may have a balloon payment. The holder of a second mortgage has rights secondary to the holder of a first mortgage lien in event of foreclosure. In a second mortgage, interest due is computed on the entire principal balance owed, which is advanced to the borrower after the required three-day rescission period. A second mortgage is, in effect, an installment loan secured by the borrower's real estate, and technically, a closed-end credit arrangement with a predetermined repayment table or amortization schedule. Contrast with home equity credit.

Second mortgages are used for a variety of borrowing needs, including home improvement, investment in a business, and raising cash. Second mortgages also are commonly used to make a smaller down payment in a first mortgage if taken out when a home is purchased.

loan secured by equity value in a borrower's home. A home equity loan, also called an equity credit line, allows the home-owner to tap into the accumulated equity in his home-the difference between the current fair market value and the amount secured by a first mortgage-by writing checks that are drawn against a line of credit. Most home equity loans require an initial sign-up fee and an appraisal of the property to determine the loan-to-value ratio Equity credit policies vary regionally, but a common practice is to set the upper limit on equity lines at an amount equal to 80% of the current market value of a home, less the outstanding mortgage balance. Also called home equity line of credit.

subordinated lien, created by a mortgage loan, over the amount of a first mortgage. Second mortgages are used at purchase to reduce the amount of a cash downpayment or in refinancing to raise cash for any purpose.

mortgage that is subordinate to other mortgages -for example, a second or a third mortgage. If a debtor defaults, the first mortgage will have to be satisfied before the junior mortgage.

mortgage that is subordinate to the lien created by a first mortgage, but senior to subsequent liens. Sometimes called a second trust, a second mortgage normally has a repayment term much shorter than a first mortgage, a fixed amortization schedule, and may have a balloon payment. The holder of a second mortgage has rights secondary to the holder of a first mortgage lien in event of foreclosure. In a second mortgage, interest due is computed on the entire principal balance owed, which is advanced to the borrower after the required three-day rescission period. A second mortgage is, in effect, an installment loan secured by the borrower's real estate, and technically, a closed-end credit arrangement with a predetermined repayment table or amortization schedule. Contrast with home equity credit.

Second mortgages are used for a variety of borrowing needs, including home improvement, investment in a business, and raising cash. Second mortgages also are commonly used to make a smaller down payment in a first mortgage if taken out when a home is purchased.

mortgage that is subordinate to other mortgages -for example, a second or a third mortgage. If a debtor defaults, the first mortgage will have to be satisfied before the junior mortgage.