Second Mortgage Calculator

Second Mortgage Calculator with amortization schedule is used to calculate the mortgage payments for your 2nd home mortgage also known as a piggyback loan.

2nd Mortgage Calculator

A second mortgage is usually used to avoid paying for the private mortgage insurance when your down payment is less than 20% on a conventional mortgage. The piggyback loan calculator will compare the costs of getting a second mortgage vs. paying for PMI. Should you get a piggyback loan to avoid paying for PMI? Use the piggyback loan calculator and find out for yourself.

What is a second mortgage?

A second mortgage is a secondary mortgage loan made in addition to the homeowner's primary mortgage. HELOC is often used as a second mortgage for many homeowners. Homeowners must have a decent home equity in their houses to take out a second mortgage. The interest rate on the second mortgage is higher than the primary mortgage, but lower than most other loans like a personal loan or credit cards. The homeowners can use a second mortgage to make home improvements, fund a college education, or as a down payment for a second house. Just like a traditional mortgage, the borrower is required to pay closing costs and other fees.

How does a second mortgage work?

A second mortgage uses the homeowner's equity to get a loan in lump sum payments. The borrower will then be required to pay back the second mortgage in installments. When most people need to buy a house, they take out a home loan from a bank to fund the purchase and use the house as collateral. The buyer then pays back the bank by making monthly installments which are made up of two parts, the principal payments and the interest payments. As time goes by, the homeowners build equity in their homes as they pay down the principal and the home appreciates. The homeowners can then leverage the equity in their homes to borrow even more money either to fund other projects or use the loan to make improvements to their homes. List the first mortgage, the borrower agrees to repay the loan in installments with a variable or fixed interest rate.

HELOC vs second mortgage

HELOC is a type of second mortgage which is what many homeowners use. A HELOC is a line of credit using the property as collateral and acts very similar to a credit card. A HELOC loan gives the borrower a limit on how much they can borrow. The borrower can borrow any amount not exceeding the limit and only pay interest on what's borrowed. Once the balance is paid off, the borrower can then borrow again up to the predetermined amount set by the lender. There is a draw period for HELOC where the borrower is only required to make interest-only payments. Once the draw period is over, there will be a repayment period where the borrowers are asked to make full payments. In the repayment period, the borrowers can no longer use the line of credit. They can only make payments to reduce the balance and eventually pay off the HELOC.

PMI vs second mortgage

Some homebuyers use a second mortgage to avoid paying for private mortgage insurance or PMI. PMI is an insurance that all borrowers must pay in traditional mortgages when their down payment is lower than 20%. Not many people can afford 20% on their mortgage, so the only way they can remove the monthly PMI is by getting a second mortgage or a piggyback loan. However, in many cases, a second mortgage may be more costly than paying for PMI. This is where the second mortgage calculator or the piggyback loan calculator comes in handy. You can use this piggyback mortgage calculator to calculate the costs of getting a second mortgage or paying for PMI out of your pocket. You will see if PMI or a second mortgage is cheaper in terms of overall interest payments or monthly payments. To learn more about private mortgage insurance, check out the PMI payoff calculator.