Equity in your home gives you options. You can utilize the equity in your home for numerous reasons. They may be used for college, debt consolidation, home repairs… basically at your discretion.
Current Second Mortgage Rates
| Home Equity Line Of Credit (HELOC) | Prime Rate 3.250% |
| Max. Combined Loan To Value Rate | Rate | APR |
| 80% | 4.750% | 4.932% |
| 85% | 5.000% | 5.171% |
| 90% | 5.250% | 5.411% |
| Home Equity Loan (Fixed Second Mortgage) |
| Max. Combined Loan To Value Rate | Rate | APR |
| 80% | 7.850% | 7.961% |
| 85% | 8.150% | 8.235% |
| 90% | 8.375% | 8.451% |
There are two types of second mortgages.
Home Equity Line of Credit (HELOC)
A line of credit tied to your house. HELOCs are tied to the prime rate.
Advantages:
> HELOCs are an open-ended line of credit. You can pay it down and reuse it again.
> HELOCs often include different payment options.
> The closing costs of a HELOC are very low and in some cases maybe nothing.
> If the prime rate drops, your interest rate drops.
Disadvantages:
> If you choose to pay interest only, your balance will never decrease.
> If the prime rate increases, your interest rate will rise.
Home Equity Loan (Fixed second mortgage):
A Home Equity Loan is fixed second mortgage tied to your house.
Advantages:
> The interest rate and payment will never change.
> You will pay down the balance with each payment.
> The closing costs are very low and in some cases maybe nothing.
Disadvantages:
> This is a close-ended mortgage. You will not be able to reuse the equity.
> If interest rates drop, your rate will not drop.
