Finance
What is a 'second mortgage' and how does it affect a Pennsylvania homeowner's financial position?
AA mortgage on a second home or investment property
BA mortgage that holds second priority position after the first mortgage; in foreclosure, the first mortgage is paid first, making second mortgages riskier and typically carrying higher interest rates✓ Correct
CA refinanced mortgage that replaces the original first mortgage
DA Pennsylvania PHFA mortgage specifically for buyers purchasing a second home
Explanation
A second mortgage is a loan secured by real property that holds second lien priority — it is repaid after the first mortgage if the property is foreclosed or sold. Second mortgages (home equity loans, fixed-rate HELOCs) are riskier for lenders because they're subordinate to the first mortgage, resulting in higher interest rates.
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Key Terms to Know
Lien
A financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Math Concepts
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