Second Mortgage

A second mortgage is a loan secured by a property that already has a first mortgage, with a claim that ranks behind it. It can be a fixed loan or a line of credit. On a rental, the second loan's payment is another debt the same rent has to cover.

A DSCR lender sizing the first mortgage looks at the whole debt load on the property. If a second lien stays in place, its payment is part of what the rent must carry, and the combined LTV has to fit under the lender's cap. Many DSCR programs limit or refuse subordinate financing for this reason.

Adding a second loan after closing does not change the first lender's ratio on paper, but it changes the real one. On the site example, a $50,000 line drawn at 9% interest-only adds $375 a month and takes the property's coverage from about 1.20 to 1.08.

Further reading: Second Mortgage on Wikipedia.