Home Equity Loans Vs Second Mortgages
Unless you're a mortgage broker or a real estate agent, terms like "home equity loans," "refinancing," and "second mortgages" can be confusing. In truth, even financial experts use these terms loosely and, at times, interchangeably. Home equity lines of credit, or HELOC loans, muddy the waters further. At 4MortgageRateQuotes.com, we can provide you with information and lender matches for each of these home loan types.
Let's consider refinancing vs. second mortgages. When you refinance, you replace your existing mortgage with a new mortgage. Homeowners sometimes refinance two, three, or more times, in order to lower their monthly payments, reduce their rate of interest, or take out a lump sum of cash. Second mortgages differ from refinance loans because they are in addition to, not in replacement of, the existing mortgage. Second mortgages and home equity loans are essentially synonymous.
HELOC Vs Home Equity Loans Vs Second Mortgages
Now let's consider home equity lines of credit (HELOC) vs. home equity loans. People sometimes use the term "home equity loan" when they actually mean "home equity line of credit." (Remember, 4MortgageRateQuotes.com can connect you with lenders able to provide you with either type of loan once you complete the simple online form.)
A HELOC is very much like a credit card. It's a line of credit--an ongoing source of credit--rather than a lump sum of money. Interest rates for HELOC loans tend to be lower than home equity loans. HELOC loans are ideal for ongoing needs (home repairs; college tuition) while home equity loans are often preferable for large, one-time purchases (a car or sailboat).