How Does a Home Equity Loan Differ From a Second Mortgage?

How Does a Home Equity Loan Differ From a Second Mortgage?

A second mortgage is a loan against a property that is already mortgaged. A lot of people consider using their own capital to finance large financial requirements, but the jargon of the mortgage industry has confused the meaning of certain terms, as well as the Second Mortgage Loan and the Home Equity Line of Credit. A second mortgage loan will be a home equity loan, which is a lump sum loan with a fixed term, or a home equity line of credit, which has variable rates and continuous access to money.

Is the Second Mortgage Right for You?

A loan to buy a house is often the first mortgage lien registered on a property; following loans depend on the amount of homeowners’ capital and usually need a new appraisal. Homeowners can use the fund from these second mortgages, available as a global capital loan or as a HELOC, for any purpose. Deciding which loan is the right for you just depends on the purpose of the loan and your personal spending habits.

What Is a Home Equity Loan?

In general, a home equity loan is a fixed-rate loan distributed in a lump sum, with terms ranging from five to thirty years. You return it in fixed installments monthly. If you anticipate an important one-time expense, this could be a fine loan such as a wedding, the buying of a second home or debt consolidation. A fixed-rate and a predictable monthly payment can help you budget because you work to reach your financial purposes. More details!

When to Consider a Home Equity Line of Credit

When you need extra money occasionally, a variable rate HELOC maybe your best option. If the lender approves it for a maximum line amount, you can access the existing funds as you want them. Use your Visa access card with the credit line on the accumulated value of the home in any place where Visa is accepted, write a check, visit a branch or ATM, or log in to Online or Mobile Banking and transfer money to your checking or savings account of Bank. You may have continuous access to funds for ten years, called the withdrawal period, after the date you open your credit line. You will have a 20 year reimbursement period after the draw period.

The minimum monthly payments are variable and are based on the amount of the line balance and variable interest rate. The funds are available again in your HELOC as you return the money. This offers you with a renewable funding source during the 10-year retirement period. If you look forward to the need to make periodic payments for tuition or remodeling, this is a great option.

Even though HELOC provides continuous access to available funds, which can be tempting for several people, there are a few critical things to keep in mind:

  • You have to compromise your home as a guarantee.
  • Your property may go through foreclosure if you do not make payments.
  • Your credit score is at stake if you are not diligent with your payments.


Home equity loans and credit lines are a great option for lots of people. The mortgage interest can be deductible, and these second mortgage loans allow you to use the capital of your home to pay the higher expenses. For more information visit:

Tracy Gibson

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