Nashville area home equity and/or second mortgages
Are you considering opening a home equity loan or maybe getting a second mortgage? Wanting to pay off debt, pay for a child’s college, complete some home improvements? There are some things that you should consider before deciding what loan is right for you:
The most common forms of a mortgage typically found in the 2nd lien position are a Home Equity Line of Credit (HELOC) and a Home Equity Loan. They are commonly referred to as 2nd Mortgages and rates are generally higher because of the greater risk to the lender.
There are two different products currently available:
- Home Equity Line of Credit: You can think of this product as a big, giant credit card secured by your house. It usually has a variable rate that is linked to the prime rate. The payment is interest only. It is normally open for a period of 10 years and then will either have a balloon payment or be amortized on a fixed rate in order to pay it off—typically another 10 years. Terms vary by lender. These are great for home improvements, education, or things that you need over a period of time. You will only pay interest on the money as you use it. Most people find when they have accomplished their goals with the HELOC they will look to roll it into a fixed rate or possibly refinance the current first mortgage and the outstanding balance on the second mortgage into one loan.
- Home Equity Loan: This is a fixed rate loan and usually comes with a higher rate then a first mortgage. Payments are fully amortized over the term of the loan. Generally, the shorter the terms of the loan, the lower the rate will be. These loans also may be structured with a balloon payment. This type of loan is primarily used for debt consolidation.
