Home equity loans vs secondary mortgage?

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Can anyone explain the difference between a home equity loan vs a secondary/junior mortgage?

  1. Reply
    February 22, 2011 at 12:03 am

    They are the same thing. The language has changed to make selling and having 2nd mortgages more “acceptable.”

  2. Reply
    Spock (rhp)
    February 22, 2011 at 12:30 am

    both take your home as security, and are second after the first mortgage (if any).

    Terms may differ. Usually, a second mortgage has a fixed life and requires amortizing payments [interest plus principal] over that life. Some jurisdictions allow home equity loans with terms that can be altered on the fly [like a line of credit] so that you repay as much or as little [BUT at least the interest] each month (and no prepayment penalties).

    does this help?

  3. Reply
    Paula M
    February 22, 2011 at 1:20 am

    Actually…they are NOT the same thing…..a 2nd mortgage is a specified dollar amount w/ repayment terms spelled out over 15,20 or 30 yrs….

    A home equity loan is like a credit card attached to your house w/ similar crappy terms….variable interest rates usually too high….The advantage to a home equity loan is that you qualify for a certain amount….but are not obligated to tap into it….some terms require a minimum used w/ the rest sitting there like a line of credit…..but again the terms are not as favorable as a 2nd mortgage…..but then neither are a very good idea and the qualifications are much tougher than they were two years ago.

  4. Reply
    February 22, 2011 at 2:02 am

    A home equity line is a line of credit using your house as the collateral. You can tap into that equity whenever you want, as long as you still have money available on the line. The advantage to this is that you can pay it down, then use it in an emergency later. The disadvantage is that, improper use of the home equity line can ruin your credit and leave you homeless. Many people have used their homes as credit cards, then realized later that the house isn’t worth what it was appraised for two years later leaving them with negative equity.

    A second mortgage is a fixed rate and term loan on the equity in your home. You can’t draw out money of a 2nd mortgage. If you can stay away from both, and just keep your first mortgage, you’ll be way ahead in the long run. If you need to draw on the equity in your home, the equity line is the best option if you are disciplined, because you can use it again and again once paid, unlike a 2nd mortgage.

    I you find that you are not a disciplined individual, you’ll definitely want the 2nd mortgage, because it has one payment every month you know you need to pay, and you’ll get all the cash at once.

    Good luck.

    Good luck.

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