With two financing options, you can use the value of your home without having to pay to refinance. With a second mortgage, you get a lump sum check with a fixed or variable interest rate. With a home equity line, you can use your home's equity whenever you want. You can write off interest on your taxes and avoid paying high financing costs with either choice.
What's good about a second mortgage
With a second mortgage, you can borrow up to 90% of the value of your home. The lender writes you one check. This lender does not have to be your main mortgage lender. You can pay off your credit cards or buy something big.
With a second mortgage, there are no or only a few fees. Most rates are fixed for at least 15 years. With a 15-year loan, you can pay off your debt faster and save money on longer interest payments.
What a home equity line can do for you
A home equity line of credit is like a secured credit card, except that you use your home's equity to borrow money. You can borrow a lump sum or just what you need. Most lenders give out both credit cards and checks.
The rates change depending on when you borrow the money. You don't have to use the equity if you don't want to, but it's good to know it's there in case of an emergency.
One way for first-time buyers to get low rates is to put down a big down payment and then apply for a home equity line. It's kind of like a safety net that makes sure you can still get to your money if you need to.
Choosing the Right Way to Finance
Each type of loan for home equity has its own benefits. A second mortgage has fixed rates and small payments spread out over a longer time. It makes sense for big projects like remodelling or paying off credit cards. A home equity line of credit gives you options and is better for smaller purchases.
Before applying for either type of programme, you should still look into lenders. Don't just look at your current mortgage lender when you need money. You want to find the best rates and terms for the least amount of money. You can do this by getting quotes for both rates and fees. You can save a lot of money by putting in a little bit of time.
