Most everyone has heard of a friend or someone complaining about having to take a second mortgage out on his or her home but you are not sure what that is right? The actual term for this is called a home equity loan. This is very common and many people can use it for whatever they want or need.
A home equity loan is going to mean that you use the house you have for collateral just like a normal home loan. There are many types of home equity loans to choose from and you need to make sure that you have the one that fits your needs the best.
You can use it for college bills, home repairs and many other things. You will need to have great credit in order to get this type of loan.
Having a closed end type home equity loan will allow you to have a lot of money right away and you will not get another loan until this one is completely paid in full.
The amount of money that you receive is going to depend on how much your home is valued at, your income and credit score. A closed end loan will come as a fixed rate and you have up to fifteen years to pay it in full.
Having an open-ended home equity loan is a little bit different. This type of loan will allow you to borrow money when you want it no matter what.
The loan officer will set you up with a line of credit and this will always be there. It will be based on the same factors as the closed end type of loan. They will have adjustable rate and you can make the payments or ten, fifteen, or even thirty years.
Why do you think they are called second mortgages? You are adding another loan payment to your monthly bills and you are using your home as collateral. It might be very tempting, but you really need to weight your options before taking one out.