What Is a Second Mortgage? Rates, Uses and More
Second mortgages let you access cash secured by your home equity — even if you don’t own your home outright yet.
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- A second mortgage is a home loan that allows you to access funds secured by your home’s equity. You typically take it out after you’ve already purchased a primary home.
- Second mortgage rates are often slightly higher than first mortgage rates, but these loans can still make sense if you need a new home or want to access cash at a low interest rate.
- A second mortgage can help you consolidate debt, make home improvements or avoid mortgage insurance.
What is a second mortgage?
Second mortgages are loans that let you access cash secured by your home equity — even if you don’t own your home outright yet.
It’s common to take out a second mortgage while you still have a first mortgage on your home. A second mortgage loan, sometimes called a “junior lien,” sits second in line to be repaid if your home goes into foreclosure. If there isn’t enough equity left, the lender may not get all of their money back.
Current second mortgage rates
Home equity loan rates
| LOAN AMOUNT | APR AS LOW AS
Rates are calculated based on conditional offers for both home equity loans and home equity lines of credit with 30-year repayment periods presented to consumers nationwide by LendingTree’s network partners in the past 30 days for each loan amount. Rates and other loan terms are subject to lender approval and not guaranteed. Not all consumers may qualify. See LendingTree’s Terms of Use for more details.
| MONTHLY PAYMENT |
|---|---|---|
| $25,000 | 8.19% | $187.60 |
| $50,000 | 6.88% | $459.85 |
| $100,000 | 6.99% | $664.63 |
| $150,000 | 7.25% | $1057.37 |
Home equity line of credit (HELOC) rates
| Loan amount | Average APR
Based on offered rates for home equity lines of credit for the respective loan amounts offered to LendingTree customers in September 2026 versus the previous month. Excludes offers of fixed terms.
|
|---|---|
| $25,000 to $49,999 | 8.96% (+0.05 percentage points) |
| $50,000 to $74,999 | 8.91% (+0.17 percentage points) |
| $75,000 to $99,999 | 8.85% (+0.15 percentage points) |
| $100,000 to $149,999 | 8.43% (+0.10 percentage points) |
| $150,000+ | 7.72% (+0.07 percentage points) |
What to expect from second mortgage rates
- You’ll typically pay a higher interest rate with a second mortgage. That’s because lenders are taking on more risk that they won’t be repaid if you default on the loan.
- You’ll have to choose between fixed or variable interest rates. Whether you’re shopping for a loan for a second home, or one to tap your home equity, you’ll have both fixed- and variable-rate options. Home equity loan rates are normally fixed, while HELOC rates are usually variable.
- Your credit score helps determine your rate. Borrowers with credit scores of 780 or higher are often rewarded with the lowest second mortgage rate offers.
- Your debt-to-income (DTI) ratio can become a limiting factor. When you’re carrying two mortgages, you’re more likely to have a higher debt load. Lenders typically won’t offer the lowest rates to borrowers with high DTI ratios.
- Your loan-to-value (LTV) ratio can affect your rate and closing costs. In most cases, the higher your LTV ratio is, the higher your rate will be.
Comparison shop with three to five different lenders to get the best rate. You may get a better second mortgage rate at a local bank or credit union if you also open a checking account there and have the monthly payments automatically withdrawn.
Types of second mortgages
Lenders typically offer home equity loans and home equity lines of credit (HELOCs) to homeowners who want to convert some of their home equity into cash. Here’s a brief look at how they compare:
| Home equity loans | HELOCs | |
|---|---|---|
| Rates | Fixed | Variable |
| Payout | Lump sum | Revolving credit line |
| Repayment | Equal payments | Interest-only payments during the draw period, and full principal and interest payments during the repayment period |
| Typical term length | Five to 30 years | 10-year draw period, 15 to 20-year repayment period |
| Rates | Often slightly higher than HELOC rates, but won’t fluctuate | Usually start off lower than home equity loan rates, but can increase over the loan term |
| Best for | Homeowners who value predictability and plan to hold the loan for years |
|
Second mortgage requirements
| Credit score minimum | 620 to 680 |
| DTI ratio maximum | 43% to 50% |
| LTV ratio maximum | 80% to 85% |
| Home equity minimum | 15% |
How does a second mortgage work?
The second mortgage process is similar to getting a first mortgage: You fill out an application, and the lender reviews your income, pulls your credit history and verifies your home’s value with a home appraisal. However, there are a few notable differences with second mortgage requirements:
-
You can’t exceed the lender’s combined loan-to-value (CLTV) ratio limits. Your LTV limit is calculated by dividing how much you’re borrowing by your home’s value. With a second mortgage, the lender adds your first and second mortgage balances together to determine your CLTV ratio.
- Most second mortgage lenders cap your CLTV at 85%, although some may lend you up to 100% of your home’s value.
-
You must qualify with two mortgage payments. A second mortgage means you’ll make two house payments each month.
- Second mortgage lenders usually accept a maximum 43% DTI ratio, although some lenders may stretch the maximum to 50%. Lenders calculate your DTI ratio by dividing your total monthly debt, including both mortgage payments, by your gross monthly income.
If you have a rough idea of your home’s value and your current loan balance, try our home equity loan calculator to estimate how much equity you may qualify to borrow.
How can a second mortgage be used?
Here are some common ways consumers use second mortgage funds:
- Consolidating debt. If you have high-interest debt, a second mortgage can be a good way to consolidate that debt at a lower interest rate.
- Paying for home improvements. Savings can’t always cover home improvements, especially if they’re time-sensitive, like fixing a leaky roof or installing a new HVAC system before winter. If you need to finance home improvements, a second mortgage will typically offer a lower interest rate compared to unsecured loan options and the interest charges may be tax-deductible if the funds are used for home improvements.
- Avoiding mortgage insurance on a home purchase. You can buy a home with a down payment as low as 10% with a “piggyback” second mortgage. You’d take out a first mortgage for up to 80% of the home’s price, and the second mortgage “piggybacks” on the first, allowing you to avoid paying for mortgage insurance.
- You need extra cash to buy a home before your current home sells. It can be hard to time the sale of your current home with the purchase of a new home. If you need to buy a new home before selling your current home, you can take out a first mortgage to cover some of the purchase and a second mortgage that covers the profit you’re expecting from your current home. When your old home sells, you can pay off the second mortgage with the sale proceeds.
- Buying another property. If you need funds for a down payment on a second home or rental property, a home equity loan or HELOC can be one way to leverage your primary home’s equity.
There are very few blanket restrictions on how you can use the cash from a second mortgage — as long as what you’re doing isn’t outright illegal activity, it could be a permissible use of the funds.
However, individual lenders do have the right to set their own limits, and some may bar you from using the money for risky activities like gambling, investing in cryptocurrency or launching a business. If you do want to use personal home equity funds for a business, you may have to shop around a bit before you’ll find a lender who allows this.
But even if your lender doesn’t prevent you from spending the funds on gambling, high-risk investing, vacations or luxury goods doesn’t mean you should. Putting what is likely your largest asset — your home — at risk for these items isn’t a smart move.
Pros and cons of second mortgages
Pros
- You can access your home equity without refinancing your first mortgage or selling your home.
- You can deduct second mortgage interest from your taxes if the funds are used to purchase or improve a home.
- You can buy a home with less than 20% down using a conventional loan and avoid paying for private mortgage insurance.
- You can consolidate debt at a lower interest rate than you’d pay with a personal loan or credit card.
- If you use the money on home improvements, business expenses or investments, you can create equity or future income.
Cons
- You could lose your home to foreclosure if you can’t make your payments.
- You’ll likely pay a higher interest rate than with a first mortgage.
- You’ll need to meet more stringent DTI and LTV ratio requirements.
- You’ll net less profit when you sell your home.
- You must cover the costs and fees associated with a second mortgage, such as appraisal fees, origination fees and other closing costs.
Yes, there are second mortgages available for borrowers with lower credit scores.
That said, home equity loan and HELOC lenders will likely reduce how much you can borrow depending on how low your scores are. Home equity lenders generally require at least a 620 credit score, although some may set a minimum as high as 680.
If you have a lot of equity but a lower credit score, consider a cash-out refinance backed by the Federal Housing Administration (FHA). An FHA cash-out refinance allows you to borrow up to 80% of your home’s value with a score as low as 500.