In the past the total amount of your mortgages, both first and second combined could not equal more than 80% of the value of your home. All this has changed with the new ultra-low interest rates that have come to be. Add to this the competitiveness of the lending market and now people are getting loans that equal up to 130% of their home?s value.

That might sound like a lot to you and in fact financial experts agree that this is too much debt to carry on your home.

If you default on your mortgage payments and your property is sold your first loan will get paid off first. Then if there is enough money left over from the sale your second mortgage will be paid as well. If however there is not enough money then it simply does not get paid. You will be left with a very large loan and no way to pay it off.

The way that the interest on your loan is determined is by the risk factor that you represent. If the lender sees that you have good credit and stand a good chance of paying of your home mortgage then you will be approved for this loan. If on the other hand you do not have the best credit in the world you will be charged a higher interest rate on your loan, if you are approved at all.

This way of determining interest applied to both your first and second mortgage. But, second mortgages generally carry a higher interest rate because when property is sold they do not get priority, this means that they are always at risk of not getting paid in full.

You will be offered a choice of terms when getting your second mortgage, included in these terms is a shorter loan life. Since these loans are smaller than first mortgages it makes sense that the life of these loans would be shorter.

Just like when you applied for your first loan you will need to shop around for the best deal around. Compare the rates of several different lenders until you find the best one for you. You will find that repayment terms are different from lender to lender.

Most second mortgages are paid monthly with part of the payment going towards the interest accrued and the rest going to pay off the principal balance. However, there are other terms such as balloon mortgages or interest only mortgages. With these loans you will only be paying interest monthly and the balance of the principal will not be due until the end of the mortgage term.

The best advice you can get when it comes to mortgages is to compare, compare, compare. It is the only way you will know you are getting the best deal in town.