Second mortgages and HELOCs (home equity lines of credit) allow homeowners to convert their home equity into liquid form.
How you use the funds is up to you, unless you choose a specialty program that lends money for a specific purpose, such as a renovation loan.
Although these loan products have many similarities, they also have several key differences. The best choice for you depends on what you plan to do with the funds.
Benefits of Second Mortgages & HELOCs
These loan programs allow you to access the cash value of your home’s equity — the difference between what the property is worth and what you owe — or some portion of it. In most cases, you can use the funds for almost any purpose.
Many borrowers use these programs to consolidate or pay off other debts, such as high-interest credit cards, student loans or auto loans. Others use them to renovate their home, add a pool, build an addition or pay for their children’s college.
Orem, Utah Second Mortgage Loans
A second mortgage loan is similar to a regular mortgage in many ways.
The amount you can borrow depends on the value of your home and your qualifications, including your credit score and debt-to-income ratio. The details of the loan depend on the type of program you choose and how much you owe on your home.
This type of loan allows you to leverage the equity you have in your home. Your home’s value is determined by an appraisal that will be performed as a part of the loan approval process. The term of a second loan is typically much shorter than a primary mortgage, usually 10 years, although the term varies based on the specific program you choose.
Most seconds require you to make a monthly payment, just as you do for your primary loan.
Home Equity Lines of Credit (HELOCs)
Like second mortgages, HELOC programs are also based on the equity you have in your home. However, this program is a true line of credit, allowing you to draw funds as you need them.
The typical term for most HELOCs is 15 years; however, you can choose from a variety of programs that best suit you.
Interest rates on Utah home equity lines of credit are typically higher than those of seconds. In many programs, the interest may be variable. Based on the amount drawn on the line, you will have a minimum monthly interest payment, but you can always pay down more.
As you repay the line, those funds again become available to you to draw out.
In Orem, Intercap Lending offers a variety of equity loan programs for borrowers to choose from. Contact us today to determine the best second mortgage or HELOC program for you.