If taken properly, a homeowner will not find a more effective financial option than to take a second mortgage on their property, most of the American consumers have become aware of revolving debt and the bad effect it can have on them and their loved one – not just now but in the future.

Practically Second mortgage can be used for anything, but typically they are taken to pay for outstanding education expenses, repairs of your home or property, to procure higher value real estate, and to pay off high interest rate credit cards as well as to consolidate or eliminate other debts.

Naturally, it wouldn’t be fiscally sound to take out a second mortgage if it would not be in your best interest as a homeowner. With so many refinancing, borrowing, and other transaction options available to the modern consumer, when is taking out a second mortgage the right way to go? A second mortgage is a good choice for the homeowner who has a need for a substantial amount of cash and also has sufficient equity in a home.

Essentially, a Second mortgage is a second lien against the value of the property, one which is paid back in monthly installments exactly the same as was the case with your first mortgage. Unlike the interest on unsecured loans and credit cards, second mortgage interest is generally tax deductible, and is therefore a viable solution to rid yourself of high interest rates which is often associated with other forms of debt.

An often overlooked nuance of obtaining a second mortgage is the very same due process which was involved in the first. All too often homeowners will take out seconds from the same financial institution used to obtain the initial mortgage. This stands to reason, as the mere thought of mortgaging your home once is overwhelming enough for a surprising amount of individuals who might otherwise benefit from the act to avoid it altogether. A Second mortgage, though, is a very important financial decision (just as, if not more important than the first) and should be treated with the same diligence and research as the first. Obtaining information through several lenders or brokers on the second mortgage regarding home mortgages such as; how much can you afford, as well as ascertaining how much of a down payment you will need, and find out all the costs involved in the loan is as vital to the process the second time around as it is the first. Simply seeing the monthly payment or the interest rate on the lien itself is not enough. Knowing information about the same loan amount, loan term, and type of loan will allow you to compare the information from each lender and broker.

The borrowers mainly are concerned with only getting their loans approved. They don’t really think as to what happens to these loans or how the lenders can afford to lend you so much of money. Here we attempt a detailed study of these factors with reference to the secondary mortgage market.

The mortgage market works in a cycle. There are basically two markets

- Primary mortgage market
- Secondary mortgage market

The primary mortgage market involves two broad categories

- The mortgage originators: this comprises depository institutions like commercial banks and thrifts and non-depository institutions like mortgage banks and brokers.

- The Secondary market conduits: this comprises the three GSEs-Freddie Mac, Fannie Mae and Ginnie Mae , and other private investment banks

- This is where the loan portfolios are held and then sold to the secondary market. In simple words the loans that you take are accumulated with details and they are sold to the big wigs.

The loans are sold in the secondary mortgage market to investors. This is done in three ways:

- The loans are sold individually-this happens especially with large loans

- The loans of the same type, meeting the same underwriting standards are pooled together into Mortgage backed securities (MBS).

- Bonds are sold which are backed by the loans.

- The monthly payment that you make to your lender is actually transferred to the GSEs and they pass it on to the investor market. But the last transaction involves a cut; the guarantee fee is deducted and allowed into the market.

- At Wall Street investors buy these loans either whole or packaged and accordingly the loans are financed. These transaction costs need to be borne by the borrowers. But the benefits that the secondary market reaps offset these.

Benefits of the secondary mortgage market

- Reduces the interest rate
- Maintains liquidity
- Restructures portfolios
- Distributes risk
- Increases the homeownership
- More home mortgages are made available
- Provides financial stability to lending institutions
- Fosters economic growth
- Provides more employment opportunities
- Attracts foreign capital markets to invest

In the earlier days mortgage market only allowed conventional loans to be sold but today the scenario is changing .Nowdays, even sub-prime loans are gaining entry and they are helping the loan originators to fund more such loans .This cycle is essential to the very sustenance of the mortgage industry

So, basically it all depends on the investors and how much they buy and what price which defines the well being of the mortgage field.