Home Equity Loan Comparison - Access Your Home's Equity Through A Second Mortgage Or Equity Loan
Written by: Carrie Reeder
You can access your home equity without the cost of refinancing
with two financing options. A second mortgage will give you a
lump sum check with a fixed or adjustable rate. A home equity
line lets you tap into your equity when you want to. Both
options allow you to write off interest on your taxes and avoid
high financing costs.
Benefits Of A Second Mortgage
A second mortgage allows you to borrow up to 90% of your home's
value. The lender, which doesn't have to be your primary
mortgage lender, writes you one check. You can choose to pay off
credit cards or make a major purchase.
Fees are none to minimal with a second mortgage. Rates are
usually fixed and last 15 or more years. A 15 year loan lets you
pay off the debt quicker, saving you cash on extended interest
payments.
Benefits Of A Home Equity Line
A home equity line is like a secured credit card, only you are
borrowing against your home's equity. You can choose to borrow a
lump sum or only as needed. Most lenders issue checks and a
credit card.
Rates are adjustable and are based on when you borrow the money.
You can choose to never use the equity, but just know it is
there in case of an emergency.
One option for new homebuyers is to put down a large down
payment, securing low rates, and then apply for a home equity
line. It's like a safety net, ensuring that you can still access
your cash if needed.
Picking The Right Financing
Each type of home equity loan has its own advantages. A second
mortgage offers secure fixed rates with small payments over a
longer period. It makes sense for large projects, such as
remodeling or paying off credit cards. A home equity line offers
flexibility, better suited for smaller purchases.
With both types of programs, you still want to investigate
lenders before applying. Be sure to look at financing companies
other than your current mortgage lender. You want to find the
lowest rates with the best terms by asking for quotes on both
rates and fees. By investing a little bit of time, you will save
yourself hundreds.
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