Lines Of Credit Vs. Traditional Second Mortgage Loans

When thinking about getting a home equity line of credit, it is best to also consider a traditional second mortgage loan. A second mortgage provides you with a predetermined sum of money repayable over a fixed period of time. Most of the time, the payment schedule will require you to make equal payments in order to pay off the loan within the loan period. Nonetheless, you might want to consider a second mortgage instead of a home equity line if you want to use the money for a definite purpose such as buy a car or do repairs on your home.

When trying to decide which type of loan is best suits your wants, you should think about the costs in terms of the two choices. Look at both, the APR and other charges but do not just compare the APRs since the APRs are figured in a different ways on the two types of loans:

• The APR for a traditional second mortgage loan takes into account the interest rate charged as well as points and other finance charges.
• The APR for a home equity line of credit is based on the periodic interest rate alone and does not include points or other finance charges.