How Long Is a Second Mortgage Term?
The term depends on the lender and mortgage product. Second mortgages are often used as shorter-term financing, so the important question is not only how long the term lasts, but what the plan is when that term ends.
← Back to Second Mortgage QuestionsThe Term Is the Period Your Current Second-Mortgage Agreement Is in Effect.
Different lenders can offer different term lengths. When the term ends, the outstanding second-mortgage balance still needs to be dealt with through a renewal, refinance, repayment or another planned exit.
Term and Amortization Are Different
The term is the length of the current mortgage agreement. Amortization is the period used to calculate how the mortgage would be paid down through scheduled payments.
Term Lengths Vary
Second-mortgage lenders can offer different term lengths depending on the lender, borrower, property and purpose of the financing.
The Balance Remains at Maturity
When the term ends, any outstanding mortgage balance does not simply disappear. It still needs to be repaid, refinanced or otherwise dealt with.
Renewal Is Not Guaranteed
The existing lender may offer a renewal, but that should never be assumed when planning how the mortgage will be repaid.
Renewal Terms Can Change
If a renewal is offered, the interest rate, lender fee and other mortgage terms may be different from the original agreement.
Know the Maturity Date
The maturity date should be known from the beginning so there is enough time to prepare the next financing step.
The Term Should Give You Enough Time to Execute the Plan.
A second mortgage is often used to solve an immediate problem while the homeowner works toward a better long-term financing position.
Before arranging the mortgage, there should be a realistic idea of what needs to change during the term and how the second mortgage will ultimately be dealt with.
The first and second mortgages may eventually be combined into one new mortgage when qualification and timing allow.
If the first mortgage is worth preserving, the second mortgage may be replaced separately.
The mortgage may be paid out using savings, sale proceeds from another asset or another planned source of funds.
If selling is part of the plan, the second mortgage can be paid out from the sale proceeds when the property closes.
Review the File Before the Second Mortgage Is Already Due.
Waiting until the maturity date can turn a manageable refinance into an urgent problem. The file should be reviewed early enough to understand the available options and complete any required appraisal, underwriting and legal work.
Review the Credit Profile
Determine whether credit has improved enough to create better lender options than were available when the second mortgage was arranged.
Review Income and Debt
Changes in income, unsecured debt and monthly obligations can affect whether conventional refinancing is now possible.
Confirm the Property Value
The current property value and resulting loan-to-value help determine which refinance options may now be available.
Check the First Mortgage
The first mortgage maturity date, rate and prepayment penalty can affect whether both mortgages should be refinanced together.
Compare Renewal With Refinancing
If the second lender offers a renewal, compare that cost with the other financing options rather than automatically accepting it.
Leave Time to Close
A refinance may require an appraisal, lender approval and legal closing, so the process should begin before the maturity date becomes urgent.
The Important Question Is What Happens When the Term Ends.
Second-mortgage terms vary by lender and product. Whatever the term length, there should be a realistic plan for repayment, refinancing or renewal, and that plan should be reviewed well before the mortgage reaches maturity.
Let's Talk →