It’s an exchange. You are exchanging all that hard earned equity for access to cash. If a homeowner is not careful about getting a second mortgage he or she can end up with a very large debt, no equity and a big house payment.

In addition, a second mortgage can lead to an extension on life of your loan. If you don’t have cash to come up with a huge monthly payment, terms on your second loan can extend a 30-year mortgage (your first mortgage) into a 45-year mortgage (with additional fifteen years to pay off second loan).

So what are some good reasons for a second loan? Debt seems to be primary reason homeowners go into this type of arrangement. Credit card, student loan, automobile and personal debt can all be wiped out and then financed at a much lower interest rate.

Basically a second mortgage is a quick way to convert some of your equity to cash so you can pay off some of your other high interest debt. If used wisely, it can be a powerful debt management tool.

How do you know if you are a candidate for a sub prime home mortgage? If you have been turned down by local lenders based on your credit and payment history then you might fall into this category. If there are problems in your file that cannot be corrected within a year or two then you might want to start looking into sub prime home loans.

On other hand, if you have a few problems in your file but there is a chance you can get them cleared up within two years or less, you might want to focus on cleaning up your file. Once you are done, your FICO score will probably go up and you can try again to get a regular home loan.