Mark Feder

Pacific Home Mortgage Funding Inc. San Diego, CA

  • Home
  • About
  • Resources
    • First Time Home Buyer Tips
    • First Time Home Seller Tips
    • Home Appraisal
    • Home Inspection
    • Loan Checklist
    • Loan Process
    • Loan Programs
    • Mortgage FAQ
    • Mortgage Glossary
  • Blog
  • Testimonials
  • Contact

The Pros and Cons of A Fixed Rate Second Mortgage vs. Opening a Home Equity Line of Credit

March 8, 2016 by Mark Feder

The Pros and Cons of Refinancing Your Mortgage vs. Opening a Home Equity Line of CreditWhen it comes to a mortgage and the financial stability of your home, there’s no such thing as too much you can know in the case of keeping your biggest investment safe. If you’re looking at paying off debt and are considering using the equity in your home, here are a few things you’ll need to know about refinancing your mortgage and home equity lines of credit.

Fixed Second Mortgage vs. HELOC

Refinancing your mortgage to access equity (without changing the existing first mortgage)comes in two basic flavors: a fixed rate mortgage or a Home Equity Line of Credit (HELOC). A fixed rate second mortgage is also known as a home equity loan. While you’re expected to pay the amount loaned back in monthly payments for a pre-determined number of years, you’ll receive this money at a fixed rate of interest. On the other hand, a home equity line of credit (HELOC) is similar to a credit card where the amount you can borrow is determined by your credit history and income, and funds are withdrawn using this line of credit, can be paid down, and then drawn back on again.

All About The Interest Rates

When you refinance using a fixed rate second mortgage, the interest rate will be fixed so you won’t have to worry about any volatile increases down the road. Since this qualifies as a second mortgage, the interest rate on it will be higher than your typical first mortgage but lower than a HELOC. When it comes to HELOC’s, the amount of interest you’ll be paying will be linked to the prime rate and will fluctuate with the market, and this means you may end up paying a higher amount of interest than you bargained on.

How The Interest Is Calculated

While refinancing your mortgage can seem like a great opportunity since you’ll be able to deal with a fixed interest rate, it’s worth noting that the way you’ll be charged is different. A mortgage refinancing will charge you interest on the total amount of your loan while a HELOC will only require you to pay interest on the money you’ve withdrawn from it, so you’ll want to consider which option works best for you.

When it comes to getting a second mortgage or opening a HELOC, there are pros and cons to both that should be considered before delving into either. As these can risk the security of your most important investment, you’ll want to carefully weigh what will work best for you. If you’re curious about other homes in your area or are thinking of downsizing, you may want to contact one of our local mortgage professionals for more information.

Filed Under: Home Mortgage Tips Tagged With: Home Mortgage Tips, Mortgages, Refinancing

Mark Feder

Mark Feder

Mortgage Advisor
Phone: 858-337-1520
Fax: 800-919-8840

DRE #01210598 • NMLS #867081 Pacific Home Mortgage Funding
Company DRE #01926221 • NMLS #1018245
Real Estate Broker – CA – Department of Real Estate
Pacific Home Mortgage Funding, Inc.
4060 30th Street
San Diego, CA 92104

Get a Rate Quote →

Connect With Me!

  • Facebook
  • LinkedIn
  • Twitter
  • YouTube

Previous Posts

Recent Articles

  • S&P Case-Shiller Home Price Indices Show Mixed Readings in March
  • Does My Current Debt Affect Getting A New Mortgage?
  • An Overview Of Mortgage Points
  • What’s Ahead For Mortgage Rates This Week – May 30, 2023
Equal Housing Lender

Categories


Pacific Home Mortgage Funding, Inc.
4060 30th Street
San Diego, CA 92104

Copyright © 2023 · Powered by MySMARTblog