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Are Mortgage Rates Different For A First And Second Mortgage?

By Stacy Williams

Are Mortgage Rates Different For A First And Second Mortgage? The answer may surprise you these handy tips will give you the facts about a second loan.

“Are mortgage rates different for a first and second mortgage?” Many homeowners who are over their heads in debt, or need a source of emergency income while waiting to find a new employment opportunity are tempted by the thought of taking out a second home mortgage loan. Unfortunately, a second mortgage typically carries a higher interest rate than a conventional first mortgage. There are exceptions to this rule however. If interest rates are particularly low when a homeowner searches for a second mortgage, and were particularly high when the homeowner obtained the first loan, the second mortgage may actually be lower.

I don’t understand why mortgage rates are different for a first and second mortgage.

A lender who offers a second mortgage on a property is taking a greater risk than the lender who supplied the primary mortgage. If the homeowner should be forced to stop making payments on his mortgage the primary lender is first in line to gain compensation from the property. The secondary mortgage holder is only able to gain compensation from the foreclosed property after the primary mortgage holder has been compensated.

Are mortgage rates different for a first and second mortgage if I have a higher credit score now?

If the borrower has a longer stable job history, a higher credit score, more available credit, and a higher income it is possible the interest rate on the second mortgage could be as low or lower than the first. However, in these cases it would almost always be wise for the homeowner to consider refinancing the first mortgage for a lower interest rate. After the re-finance of the primary mortgage the second mortgage would almost certainly be higher than the new primary mortgage rate.

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3. How Are Mortgage Rates And Credit Scores Related?
4. Why Do Lenders Price Mortgages With Different Interest Rates?
5. What Is A Reverse Equity Mortgage?