Use your home's equity for a second mortgage to manage major expenses without spending a ton out of pocket.
A closed-end second mortgage is a home equity loan that allows you to draw from the equity in your home so you can transform it into a safe haven and comfortable oasis without spending a ton out of pocket.
This type of home loan is best for homeowners that have a specific purpose in mind–maybe a backyard renovation or adding an additional room, or even debt consolidation.
A second mortgage loan is great for those who have a specific budget in mind, but what if you need more flexibility? Compare the differences between a second mortgage and a home equity line of credit to see which is the best option to achieve your goals.
Your amount of equity is determined by subtracting the current mortgage balance and any additional loans or lines of credit using the home as collateral from the current home value.
SunWest lends up to 80% of your total appraised value.
The minimum loan amount for a SunWest Second Mortgage is $5,000.
A first mortgage is the primary mortgage loan that goes toward paying a home. This could be the loan you used for the initial purchase of the home or a refinance.
For example, you purchased a home for $300,000 by getting a loan from Bank A. Bank A places a lien on your home that’s removed once you pay off the loan. This is your first mortgage. 5 years later, you decide to refinance for a lower rate. The refinance would also be considered a first mortgage because it is still the primary loan that pays for the home.
A second mortgage, or home equity loan, is a loan you take out using the equity you have available from your home’s value.
For example, you owe $100,000 on your home, and it’s worth $300,000. You have $200,000 in home equity. You need a new stove, money for a wedding, and want to pay off some high-interest credit cards, so you take out a second mortgage for $100,000 with Credit Union A. Bank A has the primary lien and Credit Union A has a secondary lien on your home.
Both second mortgages and HELOCs (home equity line of credit) are loans you take out using the equity you have available from your home’s value.
The difference between a second mortgage and a heloc is that a second mortgage is a closed-end loan where you get a lump sum and you pay it back each month over your specified term; whereas, a HELOC is a revolving line of credit similar to a credit card. You are approved up to a certain limit and can continue to use up to that amount for a specified period.
That depends on your goals. A second mortgage is perfect if you only want to borrow a specific amount and pay it back. Second mortgages have a fixed monthly payment and a fixed interest rate.
For example, you want to finance the installation of a new, total home security system and pay it back with a moderate to large monthly payment.
A home equity line of credit is great for people who want more flexibility in how much they borrow and how frequently. With a SunWest HELOC, you can use the credit line for up to 5 years, paying a percentage of the balance each month. Once the 5-year period ends, the line is closed, and you pay a fixed monthly payment for up to 10 years. HELOCs also have a variable interest rate that can increase a max of 1% every 6 months.
For example, you will be doing home renovations that will include a lot of projects that you want to do one at a time, using the line as you go.
*APR = Annual Percentage Rate.
** LTV = Loan to Value.
See a representative for details.
1. Rates listed subject to change and based on the lowest current offer. Rates are determined by factors such as, but not limited to, loan term, credit score, and home value. Minimum and maximum loan balances may vary by term. All calculations listed in the chart above are estimates to illustrate loan and rate cost and should not be used as a formal quote. Please speak with a representative to quote your specific rate and payment.
