Is A Home Equity Loan A Second Mortgage?

It is very easy to understand why many people confuse the terms “second mortgage” and “home equity loan”. A home equity loan is very similar to a second mortgage in the way that the money is secured. Both types of loans are collateralized by the equity in your home. The main difference in the loan types is the way the money is disbursed to the borrower and the way repayment and interest rates are calculated.

So What Is The Difference Between A Home Equity Loan And A Second Mortgage

A home equity loan is more like a credit card transaction than a full blown mortgage. With this type of loan you are given a credit limit based on the equity available in your home. You can than use that credit line as much, or as little, as you choose. Many home equity loans issue a debit card or check book so the borrower has instant access to the money. Repayment is made on a schedule agreed upon at time of closing and the interest will only be charged on the amount that is currently being used. A straight second mortgage pays the borrower a lump sum at the time of closing and repayment begins immediately. No additional funds can be drawn from this type of loan.

Is A Home Equity Loan Hard To Get

When you apply for a home equity loan you will go through the same process as you did for a mortgage. The main part of this process is determining the eligible amount of equity in the property. The entire process should take no longer than a usual mortgage does to complete. Some lines of credit can be processed within 24 hours, it will depend on your lender.

Is A Home Equity Loan A Second Mortgage?

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