The second-lien market is entering a new growth cycle, and Deephaven is helping lead the conversation. With projections exceeding $60 billion in originations for 2025, second liens have moved from a niche product to a mainstream financing tool for both homeowners and investors. U.S. homeowners collectively hold $35 trillion in home equity, and roughly 85% are locked into first-lien rates below 5%, creating strong demand for alternatives to traditional refinancing.
According to Tom Davis, Chief Sales Officer at Deephaven, this surge reflects more than favorable market conditions; it marks a strategic shift in how lenders can serve borrowers. “Second liens have moved to the forefront because they address today’s affordability challenges head-on,” Davis explains. “They give homeowners flexibility, preserve low first-mortgage rates, and provide originators with a powerful way to re-engage existing customers.” As consumers look to manage higher costs and debt, second liens offer a sustainable path for lenders ready to educate and lead.
Why second liens are poised for continued growth
The average U.S. home is now 40 to 50 years old, prompting many owners to renovate rather than move. Meanwhile, consumer debt continues to climb—over $1 trillion in credit card debt and nearly $3.5 trillion in auto and student loan debt combined. In this environment, second liens help homeowners consolidate debt, improve cash flow, and fund home improvements without disturbing their first mortgage.
Affordability is the key driver. Rising taxes, insurance, and home prices make refinancing or moving less viable. Second liens provide liquidity while preserving historically low first-lien rates. The Mortgage Bankers Association is projecting mortgage rates of 6.4% in 2026 and 6.2% in 2027, far from the level needed to reignite large-scale refinancing. Until rates drop significantly, second liens will remain a primary tool for liquidity and investment.
Five strategies to position second liens with customers
Originators can build engagement and retention by presenting second liens as timely, value-driven solutions:
- Preserve the borrower’s low first-rate mortgage. Emphasize keeping their existing rate while accessing equity through a second lien.
- Unlock cash for renovations or growth. Highlight equity as a resource for upgrades, debt consolidation, or investments.
- Serve self-employed and non-traditional borrowers. Offer programs using alternative documentation, such as bank statements or P&Ls.
- Integrate into broader investment strategies. Show investors how to leverage equity to improve returns and property value.
- Differentiate through advisory value. Move beyond transactional lending by providing tailored financial guidance.
By taking an educational, solution-oriented approach, originators can position themselves as trusted advisors while strengthening long-term relationships. For more information, download DeepHaven’s Guide below.
Guiding borrowers: HELOCs, second liens and renovation loans
HELOCs offer flexibility by allowing borrowers to draw funds as needed, while closed-end seconds provide a fixed-term lump sum—often with lower closing costs than cash-out refinances. Many HELOCs feature interest-only payment options, appealing to borrowers who want ongoing access to credit without resetting their first mortgage.
Both structures help preserve low first-lien rates and may offer tax advantages when used for home improvements. For example, it makes little sense to replace a $500,000 mortgage at 2.5% just to access $50,000 in equity. Educating borrowers on these distinctions positions loan officers as trusted financial advisors and strengthens client loyalty.
Leveraging existing borrowers for second-lien growth
Before investing in new marketing, lenders should mine their existing customer data. Most past borrowers have substantial untapped equity, making them the most cost-effective source of new business. Tools like automated valuation models (AVMs) help identify and prequalify second-lien opportunities efficiently.
Large servicers have expanded portfolios this way, and independent mortgage bankers can do the same. Offering second liens meets borrower needs and strengthens recapture efforts. Targeting borrowers with low first-lien rates and high revolving debt can help clients consolidate and improve cash flow while keeping them positioned for future refinancing.
Navigating compliance and underwriting
Partnering with investors experienced in second-lien lending provides essential structure, underwriting guidance, and compliance support. Most second liens follow familiar qualification standards, including full documentation or alternative income programs such as bank statements, P&Ls, or DSCRs for investors. While HELOCs are structured differently, they follow similar disclosure and documentation frameworks, ensuring borrower transparency and lender protection.
Leveraging second liens to secure future refinances
When a servicer holds both the first and second lien, they are in a strong position to retain that borrower. Offering second-lien products preserves relationships and prevents runoff when borrowers seek cash-out refinances. Analytics can help lenders anticipate when a borrower may be ready to refinance and proactively deliver competitive offers—making it harder for competitors to intervene.
Relationships and recency matter. Most homeowners won’t recall who originated their first mortgage years ago, but they will remember the loan officer who recently helped them consolidate debt or renovate. Staying visible with relevant solutions like second liens reinforces loyalty and opens doors to new borrowers. Partnerships with contractors, remodelers, and other home improvement professionals can also generate consistent referral opportunities and reinforce the originator’s role as a go-to financing expert.
Looking ahead
The rise of second liens marks a lasting shift in how homeowners leverage equity and manage debt. With vast untapped home equity, stable rates, and mounting financial pressures, demand for flexible lending options will continue to grow. Deephaven remains committed to supporting lenders and originators with the tools, programs, and expertise needed to thrive in this evolving market.
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