Home Equity Loan: Second Mortgage Loan Advantages

A second mortgage might be a better choice than a home equity line of credit for homeowners. Second mortgages have many advantages in today’s economy, making them a far better choice than the typical home equity line of credit.

Interest Rates are Rising: When you opt for a Home Equity Line of Credit, or HELOC, your loan may have a variable interest rate, which will change when the lender adjusts your loan, and may rise and fall over time. When you opt for a home equity loan with fixed interest, your rate is locked in at this rate only, and will remain the same for the duration of the loan. Locking in your rate with a Fixed Interest Rate Loan will guarantee that your payments never change, regardless of how the interest rate changes.

Only Borrow What you Need: Home Equity Lines of Credit (HELOC) tend to be risky because it is tempting to keep spending. The borrower is provided with a debit card which can be used to make purchases, drawing money out of the equity line. Because it is so easy to gain access to this equity, many homeowner tend to overspend. Using a second mortgage instead will allow these homeowners to borrow a fixed amount, rather than offering them the temptation to overspend.

Fixed Payment Amounts: Second mortgages come with fixed interest, so borrowers can count on their payment to always remain the same for the duration of their loan. This allows many homeowners to budget for additional payments while still keeping control of their finances. Because Home Equity Lines of Credit (HELOC) have variable interest rates, homeowners will run the risk of their payment always increasing as interest rates rise over time.