A stand-alone second mortgage is an additional loan taken out against your house when you already have a first mortgage. When you borrow money against your home to consolidate debt or build an addition, and you don’t touch your pre-existing first mortgage, you’re taking a stand-alone second mortgage.

What happens when you sell a house with a second mortgage?

A second mortgage should have little or no effect on a homeowner’s ability to sell her home. While the effects on buyers are nonexistent, sellers must pay off second mortgages just as they must pay off first mortgages.

What happens when you take a second mortgage?

When you take out a second mortgage, your lender may give you a single lump-sum home equity loan or a revolving line of home equity credit. If you cannot pay back your second mortgage, your lender can take your home.

How much equity do you need for a second mortgage?

Equity requirements vary, but many lenders prefer that you have at least 15 percent to 20 percent equity in your home. You can typically borrow up to 85 percent of your home’s value, minus your current mortgage debts.

Can I sell my house if I have a second charge mortgage?

What if you move home? If you sell your home, you’ll need to pay off your second charge mortgage. Or, if your lender allows it, transfer the second mortgage to a new property.

How does a stand alone second mortgage work?

Lenders issue stand alone second mortgages based on the equity you have available in your home. Your currently available total equity is the appraised value of your home minus the balance on your home’s primary mortgage. Lenders may loan you all or a portion of this available equity through a stand alone second mortgage.

When does a second mortgage go into foreclosure?

The loan is known as a second mortgage because your purchase loan is typically the first loan in line to be repaid if your home goes into foreclosure. 1  This means that if a worst-case scenario occurs and you can no longer pay your mortgage and the lender sells your home, your first mortgage would be paid first.

Which is an example of a second mortgage?

A few common examples of second mortgages are home equity loans and home equity lines of credit (HELOCs). A senior lien, such as a first mortgage, takes priority over a junior lien, such as a second mortgage. Priority determines which lender gets paid before other lenders after a foreclosure sale.

What happens if you default on a second mortgage?

In other words, your lender has the right to take control of your home if you default on your loan. When you take out a second mortgage, a lien is taken out against the portion of your home that you’ve paid off.