A mortgage that is subordinate to a first or prior (senior) mortgage is called a junior mortgage.
A junior mortgage is also called a second mortgage but it could also be a third or fourth mortgage like a home equity loan or lines of credit. The initial or primary mortgage will be paid down first in the case of a foreclosure.
A home loan made in addition to the home’s primary mortgage is a junior mortgage.
A junior mortgage often comes with a higher interest rate and lower loan amount. There are also limitations and additional restrictions when you opt for this mortgage.
A junior may be caught to finance large purchases like home remodeling, college fees, or but a new vehicle.
A subordinate mortgage made while an original mortgage is still effective is called a junior mortgage.
If for some reason you default all the proceeds from the liquidation of the property will be used to pay off the first or primary mortgage. Only when the first mortgage has been paid off the junior mortgages would receive repayments.
Piggyback mortgages and home equity loans are the common uses of junior mortgages.
A piggyback mortgage helps borrowers who have less than a 20% down payment so that they can avoid costly private mortgage insurance. And a home equity loan is used to use the equity of a home to pay other debts.