A second mortgage is a lien taken out on a property that already has another mortgage attached to it. In the case that the loan goes into default, the first mortgage will be paid off first before the second mortgage. Therefore, a second mortgage is typically riskier for lenders and will often come with a higher interest rate. Interest-only payments means that for a period of time, the payments you make on the loan go 100% towards the interest that is accruing on the mortgage. And a balloon payment means that, at the end of the term of the loan, the balance of the mortgage is due all at once.