Question:

Second mortgage vs home equity lines – which is better?

Answer:

Well, one cannot tell easily which is better. Second mortgage vs home equity lines can be compared in terms of payment plans and rates, but essentially they are the same. They are both second mortgage loans taken against your equity.

Second Mortgage vs HELOC

The original second mortgage loan usually comes with a fixed rate, regular mortgage closing costs and a one lump sum payment option while home equity lines of credit (HELOCs) come with adjustable rate, multiple payments options and many traditional mortgage fees are waived at closing.

Also, a pure second mortgage does not carry the possibility to overspend as you know what you have borrowed and why. At the same time, the revolving nature of home equity lines can easily get you in more debt that you need, even if you opened the line as an emergency resource only. HELOCs may carry higher rates than regular seconds, better be aware of that.

Often, though, there will be a several month grace period when no interest will be accrued on your HELOC spending which makes them more attractive.

Both original second mortgages and home equity lines have tax deductible interest.

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
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