Home Equity Loans
Second mortgages are basically any loan entailing a second lien on the property. But, starting about 20 years ago, some confusion crept in as to the correct terminology of home equity loans, second mortgages, and countrywide home loans as well.
Home Equity Loans as lines of credit
In the 1980s second mortgages, or home equity loans began showing up which were essentially constructed as lines of credit and not for a fixed dollar amount. These home loans allow the borrower to draw out a certain amount of money whenever they choose and to be used at their discretion. They are called home equity loans or home equity lines of credit, otherwise known as HELOC. Home equity loans and HELOCs are always adjustable rate.
Which one is better for me?
That depends on what your needs are and especially what they will be in the long term. If you are thinking to use the home equity loan over a long period of time it would be better for you to take out a HELOC. Many people use this if they will be making successive home improvements or if the money will be used for college tuition.
If you need the money all at once home equity loans with a fixed dollar amount would be your best bet. But, as the borrower, it is up to you to decide whether you want fixed or adjustable rates. And that's what is so great about mortgage loans - options.
More about your money
If you do own your home outright but want a line of credit secured by a mortgage, then it would be a HELOC as opposed to home equity loans. This is the case even though it's your first mortgage. And if you refinance your first mortgage with a HELOC, then the HELOC becomes your first home mortgage.
The more you know about home equity loans, the better you will feel about the decisions that you make. You can go into the great big world of home equity loans with a smile on your face and a bounce in your step. And if you are in the market for one of the debt consolidation mortgage loans as well then look to some of the other pages on the Nerd's site!
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