What is the difference between a mortgage and a home equity loan?

Comments

1. MSC says:

   August 6, 2009 at 4:17 pm

   mortgage repayments are generally over a much longer period of time than with a home equity loan, and the interest rates are lower with the mortgage. Go for it.
2. MSC says:

   August 6, 2009 at 4:17 pm

   No, you can take out a first mortgage. HELOC's are generally second liens on a home, but the loan structure may allow them to be first liens as well.

   The major difference is how much you are committed to and the time frame in which they can be paid.

   If you KNOW you need to take out $30-50K or more, then get a mortgage on your home, as these are definately the best rates. HELOC's cost more b/c you are not required to take an immediate draw, and it's actually a line of credit…much like a credit card.

   You don't want to take out a HELOC if you have another alternative.

   PS: $30,000 is usually the minimum for a first mortgage…HELOCS are less…that may also make a difference to you.
3. MSC says:

   August 6, 2009 at 4:17 pm

   The main difference is that with a mortgage you are borrowing all of the money at once and will be paying interest on the entire amount from day one. home equity loans allow you to draw the funds on an as needed basis and only pay on the money you are using. They are both liens on your real estate and can be in first or second position. Most equity lines adjust the interest rate based on a % over prime and are therefore similar to adjustable rate mortgages in terms of interest.
4. MSC says:

   August 6, 2009 at 4:17 pm

   There is no difference. They are both mortgages. Both will take a lien agaisnt your property. You have a couple options.

   1. You take out a set amount of money, say 50,000. You will pay payments on that until you pay it off.

   2. You take out a home equity line of credit for 50,000. That is like a credit card you can pay it down and then borrower against it again. You only pay what you take out. It can go up and down.

   The first choice is amortized with a fixed payment to fixed terms, the second can adjust according to what you do with the money.
5. MSC says:

   August 6, 2009 at 4:17 pm

   You can easily get a fixed rate first mortgage and get cash out (equity) for your scenario. Check with your local bank or mortgage company. You are not required to take out a HELOC.

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