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Home Equity Loan |
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When a house has no loan outstanding on it and the owner wants to get one, what is the difference between a "mortgage" and a "home equity loan"? It doesn't seem that there should be any difference, but the interest rates on the two ARE different. |
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As you realize, a home equity loan really is simply a second mortgage. One way is differs is that it usually offers a line of credit, with no interest due until the borrower actually taps the credit and draws money. Because it isn't backed by quite as much security as a first mortgage, it does usually charge a higher rate of interest to make up for the additional risk.
When a house is free and clear, borrowing against it would usually be in the form of a less expensive first mortgage. But perhaps one could arrange a line of credit against it instead. |
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Edith
Originally published on February 16, 2008 |
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