Second Mortgage Rates
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Are second mortgage rates the same as first mortgage rates? This is a very common question asked by many consumers. The answer is simply no. Second mortgage rates are generally a bit higher than first mortgage rates. The main reason that 2nd mortgage rates are usually higher is because a 2nd mortgage is a riskier loan than a first mortgage. If a borrower defaults on his or her mortgage and the house is foreclosed upon the first mortgage holder is paid first out of the proceeds of the sale of the property and then if there is anything left over, the second mortgage lender will receive what is left (up to the amount of the 2nd mortgage loan). Most of the time the second mortgage lender sees little, if any, money out of the sale of a foreclosed home. Therefore, this is the main reason as to why second mortgage rates are generally higher than first mortgage rates.Second mortgages are called subordinate loans because they are behind the first mortgage and therefore, second mortgages are riskier for the lender, who generally charges a higher interest rate.