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Comparing Home Equity Loans to Second Mortgages
Author David Schneider | May 23,2007
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Jonathan was researching mortgages for his parents online when he came across two terms that seemed interchangeable. The terms were home equity loans and second mortgages. As Jonathan went about comparing home equity loans to second mortgages, he discovered the difference. People usually use the term home equity loan to describe loans taken out several years after the homeowners used the first mortgage to purchase the home. However, people use the term second mortgage to describe loans that people take out both at the time of the purchase or later on down the road. Upon closer look, Jonathan thought these loans seemed similar, but they do have some differences.
Comparing Home Equity Loans to Second Mortgages
If you are shopping for a home equity loan, chances are you are interested in cashing out your equity for a specific reason. Most people who take out a home equity loan want to pay off their high interest rate credit cards or make home repairs. Lenders usually offer home equity loans as a fixed rate home equity loan that is worth as much the homeowner's equity value. This is a revolving line of credit that has a credit limit that is worth as much as the homeowner's equity value, or as a fixed rate home equity loan that is worth up to 125 percent of the homeowner's equity value. To qualify for a home equity loan you need to meet specific credit and income criteria and you need to be able to pay your home equity monthly payments.
You can use a second mortgage, like a home equity mortgage, to cash out the equity in a home. People who use second mortgages to cash out their equity most likely use it to pay off their credit cards or paying for an emergency expense. The qualifications for this type of mortgage are the same as those used by home equity loans. You have to meet specific credit and income criteria and you have to be able to pay for your monthly premiums.
While second mortgages and home equity loans look similar, they do differ in two areas. The first area that they differ is how you can take each loan out. You can take out a second mortgage to help purchase a home, or you can use it to cash out equity that you have earned in your home after several years of appreciation and loan payments. Home equity loans, on the other hand, you can take out after you own your home. The second area that home equity loans and second mortgages differ is their interest rates. Interest rates for second mortgages tend to be higher than those offered by first mortgages and they tend to be slightly higher then the interest rates offered by loans defined as a home equity loan.
Finding a Lender
After comparing home equity loans to second mortgages you should know which loan product is right for you. When you are ready to apply for a second mortgage or a home equity loan visit QuoteMatch.com and fill out a mortgage quote request form. QuoteMatch.com will then match your profile with lenders who are looking for customers just like you. It's time to cash out your equity, go to QuoteMatch.com today. |
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