Second Home Mortgage

Also called ‘a line of credit' or a ‘home equity loan'.

If you need to borrow money then you might be thinking about a second home mortgage, also called ‘a line of credit' or a ‘home equity loan'. These types of loan generally have a lower interest rate than a credit card or other types of credit. The interest rate is usually fixed over an agreed term and you receive your money in a lump sum. The value of the loan is based on the amount of equity in your property, in other words the proportion of your home that you own outright. Any money you borrow with a second home mortgage is secured against your home.

You may be familiar with a plan-vanilla mortgage, so what's a second mortgage? It's simply another mortgage on your home – a loan secured against the property. The term “second” indicates that the loan does not have priority on your home in case you default. Instead, your first mortgage has priority and would be paid before any funds go towards the second mortgage.

Check to see if you can benefit from tax advantages with a second home mortgage. In many instances, the interest on this type of loan up to $100,000 can be fully tax-deductible; up to 100% of your home's value. Take professional advice to ensure that you take advantage of any state variations or concessions.