Here is the typical scene of a mortgage; a lender gives money to a borrower, who buys a home. The home is the collateral to the loan and the borrower is expected to make the payments for the loan regularly depending on the terms and conditions of the loan. In the event of default, the lender will sell the home. In the life of the loan the borrower may have borrowed another loan on the home, having it acting like collateral as well. In this sense the second lender has some interests on the home as well as in the event of a default on the second loan and the first loan, the first lender has primary claim on the property.
For a long time, taking a second mortgage meant the same thing as home equity loan. The latter is a loan system that allowed borrowers to borrow against the equity that they had gained on their home, so that they can repay it along with their mortgage repayments all through their mortgage repayment period. The credit that was gotten and for which the home acted as a security for the home was the second mortgage. The money had to be paid within a certain period of time, and the equity built up on the home was to act as the security for the loan. There was a fixed interest rate on the loan, which was payable within a period stipulated by the lending institution. A home equity loan the other hand was given to the borrower as a lump sum and carried a fixed rate of interest as well.
The second term mortgage was either a home equity loan or a home equity line of credit. There is a big difference between refinancing a first mortgage and getting a second mortgage. Refinancing is getting a second loan before the first one has been paid. The second loan usually has a lower interest rate than the first interest loan. Refinancing a loan will benefit the borrower with a lower interest rate compared to the first time. Getting a second mortgage on the other hand does not replace the first one, but rather run side by side. The same property will be used as collateral and the first mortgage has primary interests in the property in the event of foreclosure. The second mortgage lenders will have secondary interests in the event of foreclosure.