A second mortgage is simply a loan that is taken out after the first mortgage. There may be various reasons to take out a second mortgage, such as.B. Consolidating debt, financing home improvements, or covering part of the down payment on the first mortgage to avoid the mortgage insurance (PMI) requirement. The second mortgage, secured by the same assets as the first mortgage, usually has a higher interest rate than the first mortgage. The amount that can be borrowed is based on the equity in the home, which is the difference between the current value of the property and the amount owed on it. Another option, if there is enough equity, is to refinance and take out a loan that exceeds the current loan balance.