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Equity Loan or Second
Mortgage?
Find out the difference |
Equity Loan (Equity Line of Credit)
A mortgage secured by the equity in your home. Most equity loans
are lines of credit, meaning that you don't borrow a lump sum at
closing. Most loans of this type allow you to write checks from
your equity line account as funds are needed. At closing the
borrower is given a dollar limit on the loan. The borrower can use
funds or pay down the balance of the loan for the life of the
loan. The loan account will generally have a fixed term (e.g., a ten
year term). |
Second Mortgage
A loan secured by a mortgage, which is
secondary to the first mortgage. Most second
mortgages involve a lump sum borrowed and received at closing.
Second mortgages do not allow for additional funds borrowed from the
account since the lump sum is distributed only at closing. Second
mortgages also have a fixed term. |
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