You can also use another method of freeing up equity by taking a second mortgage. Most lenders will take a second mortgage on a house even if you have little or no equity in the property. If you have good credit you can get a loan for up to 125% of the house's value. The main advantage of a second mortgage is the low rate relative to other means of financing.

The most common type of a second mortgage is a fixed-rate, simple interest loan. This does not change the terms of the current first mortgage. The interst portion of a second mortgage can also be tax-deductible (consult your tax advisor for more information).

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