In what situation would a second mortgage typically be used?

A second mortgage is typically used to secure additional funds while retaining the first mortgage, allowing the homeowner to tap into their equity without refinancing the primary loan. This situation can be advantageous for homeowners who need funds for various purposes such as consolidating debt, making home improvements, or covering major expenses like medical bills or education costs.

In this context, a second mortgage acts as a subordinate lien to the first mortgage and allows homeowners to leverage the equity they have built in their property. This financial tool can provide a solution for those looking to access funds while keeping their existing mortgage terms intact.

The other options do not accurately represent the primary use of a second mortgage. Refinancing a first mortgage involves obtaining a new mortgage to replace the existing one, which is different from taking out a second mortgage. It is also not limited to buying a new home, as second mortgages are typically related to existing properties. Lastly, a second mortgage is usually not applicable to unencumbered properties, where there are no existing liens or mortgages.