Second Mortgage vs. Home Equity Loan: Is There a Difference?

As a homeowner, you’ve likely been paying your mortgage for some time and feeling good about the equity you’re building. Now, something’s come up. You may need money to renovate, make repairs, cover a large expense, or make a major purchase, such as an RV or another home. You’re then pondering: second mortgage vs. home equity loan?

But what do these terms really mean? In this guide, we’ll clarify these homeowner borrowing tools and help you determine which option might be best for your situation.

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Second mortgage vs. home equity loan

There’s often confusion about the terms “second mortgage” and “home equity loan.” In reality, a home equity loan is a type of second mortgage. Similarly, a home equity line of credit (HELOC) is also considered a second mortgage.

Both home equity loans and HELOCs use your home as collateral, but they offer different features and benefits. A second mortgage is a loan that lets you borrow against the equity in your home, separate from your original mortgage. It’s called a “second” mortgage because it’s recorded after your first mortgage, meaning the lender is second in line to be repaid if you default.

In the following sections, we’ll clarify these concepts and explain when and how they might be a solution to access the cash you need.



from HomeLight Blog https://www.homelight.com/blog/buyer-second-mortgage-vs-home-equity-loan/

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