traditional second mortgage and home equity line of credit

Hi Mark,

Both of them are second mortgages.

In a traditional second mortgage, you will typically find a fixed rate and all the funds are paid out at closing here.

In a home equity line of credit, the funds are drawn from a credit line account as required and are not paid out in a lump sum at the time of closing. The rate here is adjustable which is normally tied to the prime rate of index.

The terms for both can be between 15 to 30 years.

In a home equity line of credit the first 10 - 15 years are the draw period with the remaining term being the repayment period.

God bless you.

For MortgageFit,
Samantha

You should consider the costs under the two types to decide which one suits you. For that you can check the APR and other charges but you should also take this into account the calculation basis of the APRs of the two loan types differ.

In traditional second mortgage the APR takes into account the interest rate charged, points and other financial charges whereas in a home equity line of credit the APR is based on the periodic interest rates and doesn't include any points or other charges.

James

Mark,

If you require a set amount for some specific purpose like any addition to your home or some other, then you should consider a traditional second mortgage instead of a home equity line of credit.

Angel

we have 2 morgages when we bought our home in may 2006. it is 5 months we have lived here. we want to combine our 2 morgages together. refinance to get a pool and pay debts. sense we dont have equity, to get a loan. can this be done

Hi Sherry,

Refinancing the two mortgages into one will certainly be helpful. You should discuss with the lender about the involved costs and whether it would be allowed or not.

You will also have to consider the current rates and if the current rates are lower then it will be a good option to refinance.

Backer

Hi Sherry,

Before you decide upon refinancing, you will have to check the long term expenses with the first and the second mortgage and from that deduct the cost of a single new mortgage you will have by of a refinance. It will give you the idea if you will have any benefits and savings out of the refinance.

Thanks

Hi Sherry,

Since you already have two mortgages and there is no equity left out in your home, so I don't think any lender will easily agree to offer you a refinance loan. You need to wait for some time, pay off some of your debts and build up sufficient equity to qualify for the refinance.

Thanks,

Sara.

hi sherry,

there are lenders in the market offering no equity home equity loans to borrowers having no equity in their property. these loans are often worth 25% more than the value of the property. so, you can look out for a lender providing such loans, but then you will have to pay higher rates of interest which are usually 2 to 6 percentage points more than the rates on traditional home equity loans.

in addition to high interest rates, there are the loan fees which are comparatively higher than the traditional home equity loans. also, you won't be getting tax deduction benefits (as in any traditional home equity loan) on these high ltv (the ratio of the loan amount to the purchase price or appraised property value whichever is lower) loans. this is because you cannot qualify for the tax break on interest paid for the amount by which the loan exceeds your property value. so, it is preferable not to go for these loans until and unless you can't do without extra cash currently.

god bless you

samantha