Opting for a second mortgage is a popular method for homeowners to raise additional finance. The homeowner can leverage additional equity against the property value of his or her house. Until recently, second mortgages were often frowned upon. The general public felt that a second mortgage was an indication that a person was unable to maintain his or her finances. Today, this view no longer holds true, and there are a number of financial institutions offering various schemes for second mortgages.

As the name suggests, a second mortgage is a mortgage that is secured on a property that already has a first mortgage on it. The value of the second mortgage will be calculated by subtracting the value of the first mortgage from the value of the home.

The second mortgage may be taken from a different lender as compared to the first. The money received from the second mortgage can be used for a variety of purposes ranging from funding home improvements to debt consolidation. As with the case of a first mortgage, a second mortgage is secured against the borrower's home. This means that the borrower risks forfeiting his home in case he is unable to meet the payments of the mortgage.

There are three main types of second mortgages offered to customers. These are a traditional second mortgage, a home equity loan and a home equity line of credit. A home equity line of credit will set a maximum limit on the size of the first and second loans. This is usually between 75% and 85% of the appraised value of the owner's property. The advantage of this type of second mortgage is that it allows you to repay the loan amount according to your own capabilities and does not enforce a strict monthly payment regime on you.

Different financial institutions offer variations of these types of mortgages. Due to the wide variety of second mortgage schemes available to the customer, interest rates for second mortgages are very attractive. Interest rates in some cases of second mortgages even fall bellow the prime lending rate. The length of a second mortgage usually begins at one year and extends to as long as 15 to 20 years. Loans of smaller amounts should ideally be repaid in shorter durations, as if stretched over long periods; the borrower would have to pay greater interest.