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2nd Mortgage Loan or Line of Credit

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turkeybaby
LIF Adult

Member since 5/05

921 total posts

Name:
Jodi

2nd Mortgage Loan or Line of Credit

I am in the process of looking for a mortgage and to avoid PMI we are going to be taking out two loans. Can someone please explain the difference of a home equity line or credit vs a home equity loan. Is one better than the other? Are the rates comparable to each other? Thanks!

Posted 4/6/07 9:56 PM
 
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HoneyBadger
YourWorstNightmare.

Member since 10/06

15979 total posts

Name:
BahBahBlackJeep

Re: 2nd Mortgage Loan or Line of Credit

As I understand it, the home equity loan is just that, a loan. So when you pay it back that's it, it's paid back and the loan is closed.

As for a home equity line of credit, for lack of a better explanation, it's like a credit card. So lets say your HELOC is for 50K. As you pay it off the balance goes down on what you owe, but you have that 50K line of credit in your name. So as you pay it off you have that much credit free to use. Like paying off a maxed out credit card. If you have a 50K limit and pay 10K towards it, you now have 10K available in credit.

Am I making sense??? Chat Icon

As for interest rates, I'm not sure if there's a difference.

Posted 4/6/07 11:15 PM
 

MegZee
My bunny

Member since 5/06

8777 total posts

Name:
Meaghan

Re: 2nd Mortgage Loan or Line of Credit

Posted by Jennie0898

As I understand it, the home equity loan is just that, a loan. So when you pay it back that's it, it's paid back and the loan is closed.

As for a home equity line of credit, for lack of a better explanation, it's like a credit card. So lets say your HELOC is for 50K. As you pay it off the balance goes down on what you owe, but you have that 50K line of credit in your name. So as you pay it off you have that much credit free to use. Like paying off a maxed out credit card. If you have a 50K limit and pay 10K towards it, you now have 10K available in credit.

Am I making sense??? Chat Icon

As for interest rates, I'm not sure if there's a difference.



thats pretty much it.

to add a little more, a home equity loan you pay principal and interest monthly. with a HELOC, you are only required to pay interest, but then the principal wont decrease unless you make a higher payment than the interest.

HELOCs usually are variable rate, while loans are fixed. usually the fixed rate is higher, but in these days with the yield curve inverted, prime is 8.25%, and fixed rates are lower.

Posted 4/7/07 10:07 AM
 

Nicole728
My Happy Girl

Member since 7/06

8198 total posts

Name:
Me

Re: 2nd Mortgage Loan or Line of Credit

we have a reg fixed mortgage and a HELOC on our home

Posted 4/7/07 10:32 AM
 

csorisi
My 2 LOVES

Member since 11/05

1984 total posts

Name:
Corinne

Re: 2nd Mortgage Loan or Line of Credit

When we bought our house we had a fixed rate mortgage and a HELOC. Our first payment was at 5% and by our second payment it went up to 9.25% so our payment doubled--thank goodness we had the money to make up the increase. After of 8 months in our home we got a home equity loan which is fixed and we pay 6.74%. I would recommend a fixed home equity loan if you can get it because at least you know what your payments will be every month with a HELOC it can change every month. Also a HELOC can be for a shorter period of time a a balloon payment will be due at the end usually for the majority of the loan amount.

Posted 4/8/07 10:35 PM
 
 

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