Home Equity Loans are typically a second lien or junior lien against the property to the first mortgage. A Home Equity Loan allows you to borrow to a predetermined loan to value based on equity established in the property. A Home Equity Loan can also be used to help offset down payment in a purchase. Unlike a HELOC, you cannot reuse the Loan as you pay down the balance of the mortgage.

Guidelines and Parameters

 Features for Home Equity Loans

• Fixed Rate
• Fixed Loan duration based on almost any amortization schedule.  The longer the amortization schedule the more likely there is a balloon in place s that the mortgage payoffs earlier.
• Funds can be used for anything once the loan is established
• Interest paid is tax deductible
• Maximum loan is based on loan to value or the equity available in your property.  Most Equity Loans will have a loan amount cap.

Features

A second mortgage or junior-lien is a loan you take out using your house as collateral while you still have another loan secured by your house. Home equity loans and home equity lines of credit (HELOCs) are common examples of second mortgages. Some second mortgages are “open-end” (meaning you can continue to take cash out up to the maximum credit amount and, as you pay down the balance, can draw again up to the same limit) and other second mortgage loans are “closed-end” (in which you receive the entire loan amount upfront and cannot redraw after that).

The term “second” means that if you can no longer pay your mortgages and your home is sold to pay off the debts, this loan is paid off second. If there is not enough equity to pay off both loans completely, your second mortgage loan lender may not get the full amount it is owed. As a result, second mortgage loans often carry higher interest rates than first mortgage loans.