# Why Consider a Second Mortgage? And When Should You Get One?

A short-term second mortgage can be a good option when you have equity in your home and you need immediate access to funds if you are unable to extend or refinance your first mortgage.

A second mortgage is basically a loan in addition to the first mortgage, which is secured against your property.

The second mortgage is also known as a secondary lien or secondary registered interest and uses the equity in your property, meaning you will have two mortgages against your property.

For a long time, second mortgages were long-term, similar to the first mortgages. However, private and non-bank [second mortgage lenders in australia](https://lsmm.com.au/second-mortgage-loan-finance/) have opened up options for borrowers, where they offer short-term second mortgages that typically last two to thirty-six months.

Second mortgages for the short-term are gaining popularity as an alternative for both personal and business financial needs. For mortgage lenders, a second mortgage means they are second in priority to be paid after the first mortgage, so they assume a higher risk. This can be a critical factor in getting a second mortgage approved and the interest rate applied to the loan.

Similar to the first mortgage, the second mortgage is secured against your property. It is important to note that second mortgage lenders will consider the loan-to-value ratio of primary and secondary mortgages when evaluating for loan approval.

Mortgages take advantage of the equity in your property. This will increase over time as you pay and reduce the principal and/or increase the value of the property. This extra capital can be obtained through a second mortgage.

You can apply online for a second mortgage with a wide variety of lenders, and once you are approved, the loan can be a lump sum or a line of credit (available for use as needed).

Let us now look at the reasons why you might consider a second mortgage. There are a number of reasons.

Regular business loans generally attract higher interest rates than loans obtained through a property, so short-term second mortgages are often considered when you need cash for boosting business or working capital.

A short-term second mortgage is usually used to fill in the gap between the purchase of one property and the sale of another when the terms of payment on the two transactions do not match.

If you plan to sell your property, a second mortgage can give you funds for home improvement that can be released immediately upon the sale of the home, that is, the first and second mortgages will be paid after the property is sold.

A short-term second mortgage with low-interest rates can be used to pay off personal loans, credit card debt, or even a significant medical or tax bill.

You can access the equity in your property to buy another property and use a second short-term mortgage to finance the deposit and/or purchase.
