A home equity line of credit is a second mortgage on your home that takes the form of a line of credit instead of a lump sum. The entire loan amount is made available to you, but you choose when.
It’s not surprising that some homeowners confuse the terms "second mortgage" and "home equity loan." If you want to take advantage of the equity that you have built up in your home, you will need to decide if a HELOC or a true second mortgage is best for you.
Interest Rates and Payments The interest rates on a second mortgage can be both an advantage and a disadvantage. When you compare a second to a first, the rate is usually higher since the lender is taking more risk. However, the rate on a second mortgage is usually better than the rate you’d get on a personal loan or a credit card.
If you need some extra funds to buy an investment property or remodel your existing house, and you are trying to decide between taking out a mortgage or a Home Equity Line of Credit, Susie Plowhead,
Minna Reid – Real Estate Agent in Woodbridge, CT – Reviews | Zillow Disclaimer: ActiveRain, Inc. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house.
The advantage of a second mortgage is that you will not have to pay these fees or worry about recouping your losses. Home Equity Line of Credit If you use a home equity line of credit you will have access to your equity over a period of several years.
A second mortgage and a home equity line of credit (HELOC) are similar in that they both use your home’s equity as collateral and will show up on your credit report. However, a second mortgage is a fixed amount lent to you for a fixed term with payments amortized or spread over the life of the loan.
While second mortgage and home equity loan interest rates are usually higher than first mortgage rates since the loan is riskier for the bank, they’re still a lot lower than rates on personal loans and credit cards.
A second mortgage is another loan taken out on a property in addition to a first mortgage. It is also commonly referred to as a home equity loan or line of credit. Technically, the term "second mortgage" refers to the actual lien position on the property.