Although there are variations in a second mortgage and the home equity loan, many homeowners are still confused about the difference between the two. A second mortgage is one of the many varieties of home equity loans, but these home equity loans are, in many ways, one and same with a line of credit. For making the most of the built up equity, it is essential to determine whether a second mortgage or a home equity loan is the right decision.
It is imperative, first of all, that you know the fundamental concepts of both the second mortgage and the home equity loan.
Second Mortgage Vs Home Equity Loan
A second mortgage would involve the payout of a fixed amount of money, either in the form of a line of credit, monthly installments or on a lump-sum basis. Repayment would be done pursuant to a specific schedule, just as would be required in the original mortgage. Notwithstanding refinancing, second mortgages are not supposed to be used in lieu of an original mortgage.
Typically, second mortgages are 5 to 30-year mortgage loans that have a fixed rate of interest. These loans are similar to an original mortgage loan, with factors determining the interest rate specifically, but not limited to present interest rate, the home?s market price and the credit history of the applicant. The interest rates on a second mortgage are a little higher and the fees lower.
Conversely, home equity loans share a number of similarities with credit cards, and credit cards might also be integrated for the purpose of making purchases. When an individual has equity on the house, he or she can acquire extra cash by means of the home equity loan.
There are two options for payments, mainly making small installments or at the same time. Some people would receive their money through the line of credit, and thus be allowed to withdraw at their convenience. Very similar to credit cards, home equity loans have a certain amount of interest charged and the amount to be borrowed is decided based on the individual?s creditworthiness.
The process of determining a home equity loan?s limits are quite simple, as the lender has to ascertain the home?s appraised value and start calculating at three fourths of aforementioned value. Thereafter, the lender would deduct the outstanding balance owed on the given mortgage.
Present financial needs would help in determining the type of loan. Wedding preparations and paying off a hospital bill are example of one-time only payments that would be best suited for a fixed-rate second mortgage.
For those who would require repeated cash disbursement on an intermittent basis, a home equity loan line of credit would be a smarter and more prudent choice on their part. A line of credit will allow homeowners to borrow money whenever the need arises, and if repayment can be made expeditiously, a good amount of money can be saved relative to second mortgages.
Moreover, it is essential to take into consideration the spending habits of an individual. If owning an additional credit card would make it more tempting to splurge more often, it could be very upsetting to obtain a home equity loan line of credit.
Search for the perfect Fort Worth House Plansto build your dream home!~
Both comments and pings are currently closed.
Source: http://beststockmarketresearch.com/2012/02/27/a-compendious-comparison-of-mortgage-vs-home-equity/
weather colorado springs weather colorado springs chaz bono tonight show tonight show unthink julianne hough
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.