First Mortgage vs Second Mortgage: What’s the Difference?

If you're planning to purchase a property or access equity from your home, you might come across terms like first mortgage and second mortgage. While both involve borrowing against real estate, they serve different purposes and come with distinct terms, risks, and priorities.

Understanding the difference between a first and second mortgage is essential when making informed property financing decisions. Here’s a breakdown of how each works and what sets them apart.

What Is a First Mortgage?

A first mortgage is the primary loan taken out to purchase a property. It is secured against the home and registered as the first charge on the property title. This means the lender who provides the first mortgage loan has the first legal claim to the property if the borrower defaults.

Key Features:

• Typically used for purchasing the property

• Larger loan amount compared to a second mortgage

• Lower interest rates due to lower risk for the lender

• First in line for repayment in case of foreclosure

Most homeowners are familiar with a first mortgage, as it’s usually what they take out when buying a home. The repayment term is often long (e.g., 20–30 years), and the interest rate can be fixed or variable.

What Is a Second Mortgage?

A second mortgage is an additional loan taken out using the equity in a property that already has a first mortgage on it. It’s considered subordinate to the first mortgage, meaning the second lender only gets repaid after the first lender is fully repaid in the event of default or sale.

Key Features:

• Used for accessing home equity (e.g., for renovations, debt consolidation, investment)

• Smaller loan amount and shorter term

• Higher interest rates due to increased lender risk

• Second in line for repayment

There are two main types of second mortgages:

1. Home equity loans – lump-sum loans with fixed rates

2. Lines of credit (HELOC) – revolving credit with variable rates

Main Differences Between First and Second Mortgages

Feature	First Mortgage	Second Mortgage
Priority	First claim on property	Secondary claim
Purpose	Property purchase	Accessing equity
Interest Rate	Lower	Higher
Risk for Lender	Lower	Higher
Repayment Term	Longer (up to 30 years)	Shorter (1–15 years)
Loan Amount	Larger	Smaller (depends on equity)

Which One Should You Choose?

• If you're buying a home, you’ll need a first mortgage.

• If you already own property and need extra funds, a second mortgage loan can be a useful option—especially if you have built up substantial equity.

However, because second mortgages carry more risk for lenders, they often come with stricter conditions and higher interest rates. It’s important to ensure you can manage both repayments to avoid the risk of foreclosure.

Final Thoughts

Both first and second mortgages can be effective financial tools—each serving different needs. While a first mortgage helps you buy property, a second mortgage allows you to tap into your existing home equity. Understanding how they differ will help you make smarter, safer borrowing decisions.