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Home Equity and Refinancing
Money Management

Is an equity line of credit considered a second mortgage?


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Wiki User
September 13, 2011 12:47AM

YES IT IS you are borrowing on the equity of your home and the loan institution will hold a lien on it.


A Home Equity Line of Credit (HELOC) differs from a second mortgage.

A HELOC is a secured revolving account. The total is set by the lender and is determined by appraised value of the real property used as collateral. The borrower may access all or part of the amount available to them . The amount can be repaid at variable terms, interest only, lump-sum, or interest and principle. The fees associated with HELOCs are generally much less and interest is paid only when money is accessed and only on the exact amount drawn.

A second mortgage reports on the credit bureaus as an installment loan. Similar to a 1st mortgage, it is a loan for a set amount and must be repaid in specific terms each month. This type of loan is secured by a separate (secondary) lien on the property and must be paid exactly as stated in the loan documents. Fees and taxes for a second mortgage are similar to a first mortgage, varying only by the percentages (since 2nd's are typically for a much lower $ amount). There is much less flexibility in this type of loan.