A second mortgage allows the homeowner to cash in on some of the equity that has built up in the home over time. Some lenders call a second mortgage a "junior lien." Getting a second mortgage is very much like taking out your first mortgage (i.e. you w ill be required to pay closing costs of 3 percent to 6 percent of the loan value).
You may deduct the interest paid on second mortgages made on or after October 13,1987, up to the $100,000 limit had already been reached when the first mortgage was taken out. The amount of second mortgages made before that date is part of your acquisition indebtedness total figure. This means that if you had $50,000 left on your first mortgage as of that date, and had taken out a $25,000 second mortgage on the property prior to October 14,1987, you would have an acquisition indebtedness of $75,000.
