Second mortgages (home equity loans) provide lump-sum liquidity secured by your home equity, usually with fixed interest rates and predictable monthly payments over 5–30 years. Unlike a HELOC’s revolving credit and variable rates, you receive all funds upfront and begin repaying principal and interest immediately. This structure can work well for one-time, large expenses such as major renovations, consolidating high-interest debt, or significant medical bills.

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Key features

• Upfront lump sum

  • You receive the full approved amount at closing and repay it over a set term.

• Fixed rate, fixed payment

  • Predictable monthly principal-and-interest payments help with retirement budgeting. Cambridge Credit Counseling

• Secured by your home

  • The loan is recorded as a second lien, behind your primary mortgage.

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Risks and trade-offs for retirees

• Higher rates than first mortgages

  • Because second mortgages are paid after the first mortgage in a foreclosure, they usually carry higher interest rates than primary mortgages. Cambridge Credit Counseling

• Tighter monthly budget

  • You’re adding a new fixed payment to your housing costs, which can strain a fixed income.

• Total housing debt matters

  • Your primary mortgage + second mortgage together affect your financial flexibility and the equity available for future needs or heirs. Cambridge Credit Counseling

• Foreclosure risk

  • Like any mortgage debt, defaulting can ultimately lead to foreclosure, since your home guarantees repayment. Cambridge Credit Counseling+1

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When a second mortgage may make sense

• You need substantial funds right away for a specific, one-time purpose (not ongoing living expenses).

• You prefer fixed, predictable payments over variable-rate flexibility.

• You have stable income (Social Security, pensions, investments) to comfortably manage the extra payment throughout retirement.

• You’ve weighed the impact on your long-term goals and estate plan and are comfortable using home equity this way.

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Learn more from Cambridge Credit

• Mortgage Basics – Explains how mortgages work, including principal, interest, and how payments affect your budget. Cambridge Credit Counseling

• How to Prevent a Foreclosure – Details the risks of falling behind on home-secured debt and options to protect your home. Cambridge Credit Counseling

• HUD-Approved Housing Counseling – Learn how Cambridge’s housing counselors can review your situation and help you evaluate home equity borrowing. Cambridge Credit Counseling+1

• Financial Education Portal – Articles and videos on housing, mortgages, and retirement planning.