what is the difference between a second mortgage and a home equity loan?Which one is easier to be approved?Are the rates and terms the same?Thanks people!
In the old days, the perception was that a second mortgage was for people who could not pay their bills. It had a negative conotation. The banks wanted to remove the negative, so they came up with a new name, a home equity loan. This is for people who want to borrow money, not those in trouble. In other words, they are the same thing, but one has a negative conotation, and the other is positive. Both require you to pledge your house for security. But, there is one big difference in some loans like this (whatever the name). Some give you a fixed amount of money at closing and that is it. Others provide a line of credit secured by a mortgage on your house. You draw on the line as you need it. After reading my post, I think I am going to beg pbm to bring back the spell check.
A home equity loan is usually easier to obtain and requests a lot less paperwork than a second mortgage. But the interest rate is usually a couple points highter. Eg, second mortgage interest rate is 7% a home equity loan rates are 8.25 or 8.5%. This has just been my experience. Dani
CHECK ON A RE-FINANCE WITH "CASH-OUT"... Mortgage is paid and all or most of the other bills are paid... BUT...you start over...run the numbers to see if this would be good for you.
I might be wrong but you might be looking at the difference between a 2nd mortgage and a home equity line of credit. As has already been mentioned, one is a fixed amount that is given to you upon closing and the other is an actual line of credit (usually with higher interest). It has been my experience that getting into a heloc is a little cheaper as they will usually let you in with no closing costs, etc. Of course, it can depend just what you need it for because if you pay higher interest you might not save any money. I used mine for debt consolodation in order to pay off some big balances (which I did). So, in my case, I didn't even carry the balance for a year and even though the interest was a few points higher at the time, not having to pay thousands at closing saved me money in the long run. Myschae
Fleet home equity line (New England) prime plus 0%. With a checking account at Fleet 5% if total of loans is less the 80% equity. if total of loans is less the 90% equity rate 6%. if total of loans is less the 100% equity rate 7%. No closing costs. Fixed loan 15yrs starts at 8.9% for up to 80% equity.
