A homeowner gets a second mortgage from the same company that provided him with his first mortgage, or he goes with another lender, notes Zillow. It's best that borrowers get quotes from various lenders and compare fees and interest rates. Factors that determine how much a person receives for his second mortgage include the current equity in his home, credit score and loan-to-value ratio.
The two types of second mortgages include home equity lines of credit and home equity loans, according to Zillow. The funds received from a line of credit are available whenever the borrower needs them, while the lender gives the borrower a large sum of money with a home equity loan. Common uses for second mortgages include making home improvements, meeting financial obligations and purchasing second homes.
Homeowners should consider the monthly payments involved with paying back a second mortgage as well as all other financial obligations they have, notes SFGate. Additional costs of second mortgages include opening, closing and maintenance costs as well as annual and appraisal fees.
Those who feel taking out second mortgages isn't in their best interests have other options, according to SFGate. First mortgages may be refinanced, and borrowers also have the option of applying for secured and unsecured loans.