How it works
You borrow a set amount once and repay it on a fixed schedule, usually 10 to 30 years. Your first mortgage is untouched, which is the entire point when you are sitting on a rate you will never see again. Closing costs are typically far lower than a full refinance.
A homeowner wants a known $80,000 lump sum for debt consolidation but wants to preserve the existing first mortgage. A fixed second mortgage can provide the cash with a set amortizing payment.
Who it can work well for
Owners who need a specific number — a renovation quote, a debt payoff, a down payment on a second property — and want a payment that never changes.
What lenders actually look at
Lenders review combined LTV, credit, income, DTI, property and lien position. Because the second lien is subordinate to the first, pricing is usually different from first-mortgage pricing.
Illustrative lender guidelines
These are educational examples, not universal approval rules. Exact requirements and maximum leverage vary by lender and complete scenario.
| Scenario | Credit / qualifier | Illustrative leverage |
|---|---|---|
| Primary, full doc | 740+ | 90% CLTV |
| Primary, full doc | 700-739 | 85% CLTV |
| Primary, full doc | 660-699 | 80% CLTV |
| Primary, no income | 700+ | 60% CLTV |
| Investment property | 700+ | 70% CLTV |
| Term | — | 10-30 years fixed |
What to watch for
No redraw. Once you pay it down you cannot access the money again without a new loan — that is the tradeoff against a HELOC line.
Common misconception: a fixed second mortgage is the same as a HELOC. A HELOAN is generally a closed-end lump-sum loan; a HELOC is a revolving line.
When this may not be the best choice
It may not be ideal if the borrower wants repeated draws, needs only temporary access to funds, or a cash-out refinance creates better overall economics.
Common questions
Related programs
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