What is the difference between a traditional second mortgage and a home equity line of credit?
Both traditional seconds as well as home equity lines of credit are technically considered second mortgages. With a traditional second mortgage, the rate is typically fixed and all funds are paid out at closing. The term of the mortgage could be anywhere from 15 to 30 years. With a Home Equity line of credit, as the name implies, the funds are drawn from a credit line account as needed and not paid out in a lump sum at closing. The rate on the credit line is typically an adjustable (usually tied to the prime rate index) and the term can be anywhere from 15 to 30 years. Home equity lines have a draw period, typically occurring in the first 10-15 years, with the remaining term on the loan referred to as the repayment period.
Related Questions
- Can I use the instructional DVD to modify my second mortgage or home equity line of credit, if it’s not with the same lender?
- What is the difference between a traditional second mortgage and a home equity line of credit?
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