There seems to be a lot of confusion between home equity loans and second mortgages, for the terminology associated to important issues such as loans and borrowing is not always as straightforward as it should be, leading to confusion and even financial problems.
Many people often remain doubtful as to the real meaning of home equity loans and mortgages as quite a large percentage of consumers still do not clearly understand the difference. People still regard these two loan times as basically the same, when in fact they are quite different as their names are too.
In order to clear up these two differences, let us start with defining a second mortgage. An authentic second mortgage is a loan that has a fixed rate that runs from fifteen to thirty years. The terms, rates and other conditions are determined by your bank credit and this will also help determine whether you will pay any points to obtain the second mortgage.
What a second mortgage involves is that it denotes a kind of home equity loan and is not the same as the latter. A home equity line of credit is the definition most loaning companies will use to describe a simple home equity loan. This means that if a loaning company proposes a home equity loan of credit, what they are offering is in fact a primary home equity loan.
This kind of home equity loan has a line of credit that revolves and will be centered in terms of fees and will end up offering a better option in terms of monthly rates you will be paying back. The second mortgage loan is the opposite, which means that the monthly rates will be higher but the fees you pay for the second mortgage will be lower.
It is clear why people can get confused over these different terms and mix them up often. However, they are clearly distinguishable between each other and will provide two separate service types if you take the time to examine each of these loan types in depth.
Furthermore, home equity loans of credit will even issue a credit card which you may use for any needs you may have as long as the bank issues you with one at the moment of the closing. Home equity loans can have a line of credit with fluctuating rates, which start from the moment you sign up for the loan or after a certain period has passed. Although home equity loans come with a variable rate you can fix the rate at the moment you close the deal and not after. Home equity loans can be an advantage when interest rates are low, provided they stay that way for some time.