With the financial crisis continuing into its second year, the real estate market looks very dismal. Foreclosures are increasing at a phenomenal rate and many homeowners are forced to vacate their properties by desperate banks hoping to seize any remaining equity. The immediate result of this is further depression of the real estate market, which in turn leads to more and more banks seizing homes in a vicious deflationary spiral. Extremely volatile conditions like these have historically been chaotic and devastating for the average homeowner.
The final result is a full-blown real estate crash, in which housing prices plunge. This is actually healthy for the economy because it allows inflated housing values to fall back to their actual levels. This may seem odd from a short-term perspective, but long-term it allows the real value of homes to grow, not just their inflated prices.
Before this final crash and depression, many homeowners take out additional mortgages on their homes to take care of their immediate needs, especially if they are strapped for cash. A second mortgage basically takes the form of a home equity loan and from a financial standpoint the two are indistinguishable. The terminology presents confusion because the word