With foreclosure situations popping into the hassled life of homeowners at random now-a-days, any solution would come off as god sent. In that regard, most homeowners look to seek a second mortgage to either fend off the fist mortgage they might be delinquent on. There are some benefits when you pick up an additional lien, but not always. Here are some important points for you to note:

Firstly, when you hold a second mortgage, you must be aware of what happens when a foreclosure process is initiated. The primary loan will have to be paid off from the proceeds arising out of the foreclosure proceeds (first mortgage always takes priority). The trouble with this situation is that if the real estate market is down the dumps -- as it is now -- you might not fetch enough to pay off the first mortgage and that would mean that you will still owe your lender. You will hence take a hit and might end up losing all your money.

Secondly, if your second loan is a high-interest one, it might set you back heavily again. Usually, a second mortgage might come your way only when you have enough equity in your home. In that case, the amount of money loaned to you will be about 70% of the equity you own. The interest rate could be sky-high at about 18-20%, notwithstanding sinful fees for the loan. In the event that you are unable to service this loan and pay up, you might default again and that would enable them to grab your home.

Finally, sad news is that assuming your primary mortgage is in sound order and you have been maintaining a good mortgage payment record, a default on the second mortgage could still trigger a foreclosure. If the lender initiates a foreclosure, the primary mortgage holder might buy out the secondary mortgage or vice-versa. In either case, they will do this only if it is beneficial for them -- if the value of the property has increased.

It is best to seek help from an experienced attorney before considering this alternative for reasons mentioned above, especially when a notice of default has been forwarded to you.