An additional loan taken out on a property that is already mortgaged. For the lender, this is more risky than the first mortgage, because they are in second position on the property’s title. If the homeowner defaulted on their payments and the property was taken into possession, the lender in first position would always be paid out first, whereas the lender in second position runs the risk of not being repaid. To compensate for this risk, mortgage rates for second mortgages are always higher than for principal mortgages.
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