My client Tom called me Friday afternoon, sounding frustrated. “I need to access some equity for my daughter’s college tuition,” he said. “But when I asked about second mortgage rates, one lender quoted me 9.2%, another said 11.5%, and a third told me I should just refinance my whole mortgage. I’m lost—what’s actually happening with second mortgage rates right now?”
Welcome to the confusing world of second mortgages in 2025, Tom.
After helping homeowners navigate equity access decisions for over a decade, I can tell you that second mortgage rates are all over the map right now. Some lenders are pricing them like premium products, others are trying to compete aggressively for market share, and everyone’s trying to figure out where the economy is headed.
The truth is, second mortgage rates aren’t just about one number—they depend on your situation, the type of second mortgage you choose, and which lender you work with. Some options might surprise you with how competitive they are, while others will make your eyes water.
Let me walk you through what’s really happening with second mortgage rates in June 2025 and help you figure out the best way to tap your home equity.
Current Second Mortgage Rates (June 16, 2025)
Here’s what we’re seeing across different types of second mortgages:
Home Equity Loans (Fixed Rate): 8.75% – 11.25% Home Equity Lines of Credit (Variable): 8.50% – 10.75% Piggyback Loans (for purchases): 9.25% – 12.00% Cash-Out Refinance: 7.15% – 7.65%
These rates have been climbing steadily over the past year. Just eighteen months ago, we were seeing home equity loans in the 5-6% range. The Federal Reserve’s inflation fight has pushed all lending rates higher, and second mortgages have gotten hit particularly hard.
But here’s what’s interesting—the spread between first and second mortgage rates has actually narrowed in some cases. While first mortgage rates have risen to 7-8%, second mortgage rates have risen even faster, but they’re not as far apart as they used to be.
Why Second Mortgage Rates Are Higher Than First Mortgages
This confuses a lot of people, so let me explain the basics.
Risk-Based Pricing
Second mortgages are riskier for lenders because they’re in “second position.” If you default and the house goes into foreclosure, the first mortgage gets paid off before the second mortgage lender sees any money.
Higher risk = higher rates. It’s that simple.
No Government Backing
Unlike many first mortgages (which can be sold to government-sponsored entities like Fannie Mae), most second mortgages stay on the lender’s books. This ties up their capital and increases their risk.
Market Liquidity
The secondary market for second mortgages is smaller and less liquid than for first mortgages. This means lenders can’t easily sell these loans to investors, so they price in extra risk premium.
Types of Second Mortgages and Their Current Rates
Home Equity Loans (Fixed Rate)
These are traditional second mortgages where you borrow a lump sum at a fixed interest rate.
Current rates: 8.75% – 11.25% Typical terms: 5-30 years Loan amounts: Up to 80-90% combined loan-to-value
Pros:
- Fixed payment that never changes
- Know exactly what you’ll pay over the life of the loan
- Good for specific projects with known costs
Cons:
- Higher rates than HELOCs initially
- You pay interest on the full amount from day one
- Less flexibility than credit lines
My client Maria used a home equity loan at 9.1% to consolidate $75,000 in credit card debt that was costing her 18-24% interest. Even at 9%, she’s saving over $600 monthly.
Home Equity Lines of Credit (HELOCs)
These work like credit cards secured by your home—you can borrow up to a certain limit and only pay interest on what you use.
Current rates: 8.50% – 10.75% (variable) Credit line limits: Up to 80-90% combined loan-to-value Draw period: Typically 10 years Repayment period: Typically 20 years
Pros:
- Lower starting rates than fixed loans
- Only pay interest on what you use
- Flexibility to borrow as needed
- Some offer interest-only payments during draw period
Cons:
- Variable rates can increase over time
- Monthly payments can change
- Interest-only payments mean you’re not building equity
HELOCs tied to Prime Rate are currently starting around 8.5%, but they include annual caps (usually 2%) and lifetime caps (usually 5-6% above starting rate).
Piggyback Loans
These are second mortgages used at purchase to avoid private mortgage insurance or make larger down payments.
Current rates: 9.25% – 12.00% Typical amounts: 10-20% of purchase price Terms: Usually 15-30 years
With first mortgage rates around 7.4% and PMI costs high, piggyback loans are making a comeback for buyers who want to avoid mortgage insurance.
Factors That Affect Your Second Mortgage Rate
Combined Loan-to-Value Ratio (CLTV)
This is your total mortgage debt divided by your home’s value. Lower CLTV = better rates.
CLTV under 70%: Best rates available CLTV 70-80%: Moderate rate increases CLTV 80-90%: Significant rate premiums CLTV above 90%: May not qualify or extremely high rates
Credit Score Impact
Second mortgage lenders are picky about credit scores:
740+ credit score: Best rates 680-739: Small rate increases 620-679: Moderate rate increases
Below 620: May not qualify with most lenders
Debt-to-Income Ratio
Most lenders want to see debt-to-income ratios below 43-45% including the new second mortgage payment.
Property Type and Location
Single-family homes: Best rates Condos: Small rate increases Investment properties: Significant rate increases Rural areas: May have limited lender options
Loan Purpose
Home improvements: Often get best rates Debt consolidation: Moderate rates Investment/speculation: Higher rates Cash out for general purposes: Varies by lender
Second Mortgage vs. Cash-Out Refinance: The Rate Comparison
This is where things get interesting in the current environment.
When Second Mortgages Make Sense
If your current first mortgage rate is below 5%, keeping it and adding a second mortgage usually makes more sense than cash-out refinancing.
Example:
- Current first mortgage: $300,000 at 3.5%
- Need: $75,000 additional
- Second mortgage at 9.5% vs. cash-out refi of $375,000 at 7.4%
The blended rate with the second mortgage is about 4.7%, significantly better than the 7.4% cash-out refinance rate.
When Cash-Out Refinancing Makes Sense
If your current rate is above 6.5%, cash-out refinancing might offer better overall costs.
Also consider cash-out refinancing if:
- You want to simplify to one payment
- You need a large amount (over $100,000)
- You want fixed-rate predictability
- You can get better loan terms (removing PMI, etc.)
Where to Find the Best Second Mortgage Rates
Credit Unions
Often offer the most competitive rates for second mortgages, especially for members with strong relationships.
Current range: 8.25% – 9.75% for well-qualified borrowers
Community Banks
Local banks often keep second mortgages in their portfolio and can be more flexible on pricing and terms.
Online Lenders
Companies like LightStream, SoFi, and others offer competitive rates for borrowers with excellent credit.
Traditional Banks
Major banks offer second mortgages but rates are often higher than credit unions or community banks.
Mortgage Brokers
Can shop multiple lenders for you, which is especially valuable in the fragmented second mortgage market.
Shopping Strategy for Best Rates
Get Multiple Quotes
Second mortgage pricing varies dramatically between lenders. Get quotes from at least 3-4 different sources:
- Your current mortgage lender
- Local credit unions
- Community banks
- Online lenders
Compare APRs, Not Just Rates
Second mortgages often have origination fees, appraisal costs, and other charges. The APR includes these costs and gives you a better comparison tool.
Consider Both Fixed and Variable Options
In the current environment, some HELOCs start significantly lower than fixed-rate home equity loans. Consider your risk tolerance and future rate expectations.
Negotiate Closing Costs
Many second mortgage lenders will waive or reduce fees to win your business, especially if you have strong credit and significant equity.
Alternative Options to Consider
Personal Loans
For smaller amounts ($50,000 or less), personal loans might be competitive:
Rates: 7% – 15% depending on credit Pros: No home as collateral, faster processing Cons: Higher rates for larger amounts, shorter terms
401(k) Loans
If your employer allows:
Rates: Usually Prime + 1% (currently about 9.5%) Pros: You pay interest to yourself Cons: Opportunity cost, must repay if you leave job
Credit Cards with Promotional Rates
For short-term needs, some credit cards offer 0% promotional rates:
Pros: No interest for promotional period Cons: High rates after promotion ends, limited amounts
Current Market Predictions
Short-Term Outlook (Rest of 2025)
Most economists expect second mortgage rates to:
- Remain elevated in current 8.5-11% range
- Follow Federal Reserve policy moves
- Stay volatile based on economic data
Medium-Term Outlook (2026)
Predictions include:
- Gradual rate declines if Fed cuts rates
- Continued spread between first and second mortgage rates
- More lender competition as market normalizes
What Could Change Everything
- Unexpected economic recession
- Major changes in Fed policy
- Banking sector stress
- Changes in government housing programs
Red Flags to Avoid
Predatory Lending Practices
Watch out for:
- Excessive fees (over 3-4% of loan amount)
- Pressure to borrow more than you need
- Payments that seem too good to be true
- Lenders who don’t verify your income
Adjustable Rate Traps
Be cautious of:
- HELOCs with teaser rates that jump dramatically
- No caps on rate increases
- Negative amortization features
- Balloon payments
Unnecessary Products
Avoid lenders who push:
- Credit insurance you don’t need
- Extended warranties
- Investment products as part of the loan
Making the Right Decision
Calculate Total Cost
Don’t just look at monthly payments. Calculate the total interest you’ll pay over the life of the loan.
Consider Your Timeline
If you might move in 2-3 years, paying high closing costs for a second mortgage might not make sense.
Evaluate Your Risk Tolerance
Fixed-rate loans provide certainty. Variable-rate options offer flexibility but include interest rate risk.
Think About Tax Implications
Interest on home equity loans may be tax-deductible if used for home improvements, but tax laws are complex—consult a tax professional.
The Bottom Line on Second Mortgage Rates
Second mortgage rates in June 2025 are significantly higher than they were during the pandemic years, but they’re still a viable option for accessing home equity—especially if you have a low-rate first mortgage you want to keep.
The key is shopping around, understanding your options, and choosing the right product for your specific situation.
My client Tom ended up choosing a HELOC at 8.75% for his daughter’s tuition because he liked the flexibility to pay it back as his income allowed. His neighbor chose a fixed-rate home equity loan at 9.25% because she wanted payment certainty for her kitchen renovation.
Both made the right choice for their situations.
Current rates aren’t fun, but if you need to access equity and the alternatives are more expensive, second mortgages still make sense for many homeowners.