You can typically borrow up to 85% of your home’s value with a second mortgage.
Jump to insightYou can get a second mortgage from banks, credit unions or online lenders.
Jump to insightIt’s generally best to avoid a second mortgage if you have bad credit.
Jump to insightWhat is a second mortgage?
A second mortgage, also known as a junior lien or second lien, is a loan that uses your home as collateral while you still have a primary mortgage. The loan is called a second mortgage because if you no longer can pay off the loan and the home is sold, the lender is paid off after the primary mortgage lender.
While a second mortgage may seem like an attractive way to handle debt consolidation or home renovations, it can be a risky option because it can extend the years you spend in debt.
What is a second mortgage used for?
While loans like student loans or auto loans are issued for a very specific purpose, the funds from a second mortgage can be used for just about anything. This gives homeowners a great deal of flexibility.
Homeowners commonly use a second mortgage for large, one-time expenses such as:
- Paying off credit cards
- Paying off student loans
- Paying for major home improvement projects
How a second mortgage works
A second mortgage provides a loan based on your home’s existing equity, which is the difference between your home’s current value and the balance on your mortgage. For example, say you have a $150,000 balance remaining on your mortgage, and your home is valued at $250,000. That means you have $100,000 in home equity.
Typically, lenders won’t allow you to receive your total equity through a second mortgage, preferring that you retain at least 15% to 20% equity. So, using the example above, you would need to retain at least $37,500 of equity, giving you the potential to borrow up to $62,500.
Types of second mortgages
There are three main types of second mortgages: piggyback loans, home equity loans and home equity lines of credit (HELOCs). Both home equity loans and HELOCs are considered to be stand-alone second mortgages, or mortgages that are taken out after the original loan.
Piggyback loan
A piggyback loan is taken out at the same time as the primary mortgage. It’s sometimes known as an 80-10-10 loan because it combines a primary mortgage for 80% of the home’s cost with a second mortgage for 10% of the home’s cost, and the buyer makes a 10% down payment.
Home equity loan
A home equity loan is a type of second mortgage in which you receive a portion of your home’s equity as a lump-sum payment. Based on how much equity you have, your income and your credit history, you can borrow up to 85% of the value of your home. You’ll make regular monthly payments to pay back the loan.
Home equity line of credit
A home equity line of credit is a revolving line of credit, similar to a credit card. It allows you to borrow up to a specific limit and pay back only what you take out. It typically has a variable interest rate, which you’ll only pay on what you use.
» MORE: Home equity loan vs. mortgage
Pros and cons of a second mortgage
A second mortgage isn’t right for everyone. For instance, interest rates on a second mortgage tend to be higher than interest rates on a primary mortgage because the second mortgage lender is paid off second if the owner defaults and the home is sold.
Pros
- Lower interest rates than credit cards
- Funds can be used for a variety of purposes
- Can help pay for large, one-time expenses
Cons
- Higher interest rates than first mortgages
- Closing costs and fees
- Risk of losing the home if the loan is not repaid
How to qualify for a second mortgage
If you decide that a second mortgage is right for you, you’ll have to apply for a loan through a financial institution, such as a bank, credit union or online mortgage lender. But before applying, figure out the following to see if you’ll qualify for a second mortgage:
Calculate your approximate home equity
To calculate your home equity, you’ll need to figure out your loan-to-value (LTV) ratio. This is the amount you’re financing compared with your home’s appraised value. Lenders may use your LTV ratio to determine how much you can borrow. However, you should keep in mind that a second mortgage loan will usually only provide up to around 85% of the home’s value, minus what you owe on your primary mortgage, so you should have at least 15% equity in your home.
Figure out your debt-to-income ratio
Your debt-to-income (DTI) ratio represents the percentage of your gross monthly income that goes toward regular debt expenses. To calculate this number, add up all your monthly debts, then divide the resulting figure by your gross monthly income. It’s generally recommended to have a debt-to-income ratio of 43% or lower.
Learn your current credit score
Your credit score is a major factor in determining whether you qualify for a loan product from a particular lender, along with your interest rate and other loan terms. You’ll usually need a credit score of at least 620, though some lenders may require a higher credit score.
Gather documentation for the application
The specific documents you’ll need to provide when you apply for a second mortgage may vary by lender and product, so be sure to check with your lender to verify you have everything you need. You may need to provide:
- Current employment and employment history
- Proof of income, such as pay stubs or W-2s
- Information about your debts and account balances
- Your most recent mortgage statement
- Information about homeowner’s association dues or condo fees, if applicable
- Proof of homeowner’s insurance
- Estimated property value, as well as the property’s purchase date and price
Compare lenders
It can help to compare rates and fees across banks, credit unions and online lenders. Shopping around may help you determine which lenders would be more likely to approve you for a second mortgage, as credit score and home equity requirements vary between lenders.
FAQ
How much is a second mortgage down payment?
On a piggyback loan, where you take out a first mortgage and a second mortgage at the same time, you are generally required to have a 10% down payment. The first mortgage covers 80% of the home price, and the second mortgage covers 10%. On a home equity loan or home equity line of credit, you should have at least 15% equity in your home.
How much are second mortgage closing costs?
Closing costs vary by the lender, but you can usually expect to pay between 2% and 5% of the loan amount in closing costs. You may be able to qualify for a second mortgage with no closing costs, depending on the product and lender.
What’s the difference between a second mortgage and a refinance?
A second mortgage is not the same as a mortgage refinance. In a mortgage refinance, you are replacing your current mortgage with a new one. With a second mortgage, you are adding a new mortgage. A mortgage refinance can be an opportunity to negotiate a lower interest rate or change your loan term. A cash-out refinance is a type of refinancing that allows you to tap into your home equity and get cash as part of the new loan.
Can you refinance a second mortgage?
Many lenders will allow you to refinance a second mortgage. Refinancing gives you the chance to renegotiate the interest rate and length of the loan. To refinance at a favorable rate, you’ll need to improve your credit score and DTI ratio from the time that your second mortgage was issued.
Can you get a second mortgage with bad credit?
It’s generally not a good idea to apply for a loan with bad credit. If you’re approved at all, you may be faced with high interest rates. If your credit score is less than ideal, take steps to fix your credit score before you apply for a second mortgage.
Bottom line: Is a second mortgage a good idea?
When you take out a second mortgage, you are taking advantage of the equity in your home. A second mortgage tends to work best for people who are trying to fund a large, one-time expense, such as paying off credit card debt or paying for home renovations.
However, second mortgages have higher interest rates than primary mortgages, though they’re lower than the rates with credit cards or personal loans. Also, you’ll have to pay closing costs and other fees, and you’ll be making a second monthly mortgage payment. If you decide a second mortgage is right for you, be sure to compare offers from multiple lenders before taking out a loan.
Article sources
ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:
- Consumer Financial Protection Bureau, “What Is a Second Mortgage Loan or 'Junior-Lien'?” Accessed May 21, 2026.
- Consumer Financial Protection Bureau, “What Is a ‘Piggyback’ Second Mortgage?” Accessed May 21, 2026.
