A junior mortgage is a loan that is taken out in addition to the primary mortgage for a home. It is used for debt consolidation, funding a large purchase, or providing working capital. Unlike primary mortgages, junior mortgages often come with higher interest rates and lower loan amounts, making them well-suited for short-term financing.

Home equity loans (HEL) and home equity lines of credit (HELOCs) are the most common types of junior mortgage. A HEL is a lump-sum loan at a fixed interest rate, which is often used to finance a single large expense such as college tuition, a home remodel, or a new vehicle. A HELOC is similar to a credit card, allowing the homeowner to borrow and pay back money as needed.

When considering a junior mortgage, it is important to weigh the cost of the loan against the intended use. Homeowners should be mindful of the long-term financial effects of any loan, since junior mortgages are often subject to additional restrictions and limitations.

Other considerations include loan duration, interest rates, and repayment terms. Homeowners should shop around for the most competitive rate and determine which loan term best fits their needs. Additionally, borrowers should consider the possibility of future income changes, or a potential career change, and adjust the loan term accordingly.

By taking out a junior mortgage, homeowners can secure additional funds for large purchases or debt consolidation. Before taking out a junior mortgage it is important to consider the total cost of the loan, the repayment terms, and the short-term and long-term effects the loan may have on the homeowner's overall financial situation.