Going for a Second Mortgage: Pros and Cons

People start looking for a second mortgage when they already have a mortgage on the property they’re still paying off but don’t want to refinance the loan. Before deciding if a second mortgage is a right move for you, consider the fact that if a debt isn’t paid and the property gets sold, the lenders will first collect the money for the first mortgage, and then will take the money for the second.

In some cases,  a second mortgage is a better option than refinancing your loan, so let’s discover the ups and downs of this alternative.

The Reasons Why People Go for a Second Mortgage

There are 2 main reasons to go for this option:

  • In case you want to use the equity of your home in order to receive a bigger loan, but the lender hasn’t approved the request.
  • If a family member can guarantee the purchasing of a house, a second mortgage will ensure the bank that the loan will be paid.


  • This is a solution for parents to help their children to purchase a property, but don’t have the financial means to support them. With the aid of a second mortgage, someone could buy a house, even if they don’t have the necessary amount of cash for the down payment.
  • If there is a parental guarantee, you won’t have to pay lenders mortgage insurance, also known as LMI. This will save you some money, due to being an expensive insurance commonly requested by the banks.
  • In case there is enough equity on the house to sustain the loan, a second mortgage will allow you to get up to 105% of the price of the property. This is probably the biggest advantage of taking another mortgage.


  • It’s time-consuming

The whole process of getting a second mortgage is a lot more complicated than it is for a first mortgage. Partly because they are rare, and also because the banks don’t really like second mortgages since they are quite risky. That’s why the paperwork will take some time.

Also, due to not being common, you’ll discover that many bank employees aren’t familiar with the process and so, errors and delays are often encountered.

  • It’s hard to get

Banks aren’t normally willing to let borrowers get a second mortgage, so they’ll try to make you reconsider your decision, or even decline your request.

If that happens, you’ll have to go to another financial institution, thus having to pay two separate loans that each comes with its costs and fees.

  • The extra fees

Unlike the first mortgage you’ve taken, the second one will come with additional costs and fees. This means that you’ll have to pay bigger charges.

Also, consider that the first lender will have to approve of you getting that second loan, so a tax will also have to be paid to the current lender.

In conclusion, taking a second mortgage is a personal decision that has to be made taking into consideration all the advantages and disadvantages, as well as the end goal.