SECOND MORTGAGES:

There are two types of second mortgages. The first one, and most popular, is a HELOC (ask Home Equity Line of Credit). The second one is a fixed rate second.

HELOC:

If you need to borrow money, home equity lines may be one useful source of credit. They may provide you with large amounts of cash at relatively low interest rates, as well as providing you with certain tax advantages unavailable with other kinds of loans. (Check with your tax advisor for details.) The rate is based off of the prime rate index and sometime has a margin that is added on to it, depending on your particular credit situation. The big advantage to having a HELOC is that the minimum payments are based on interest only and only what you borrower on and you can access the remaining equity at any time by way of a check or HELOC credit card. e.g. if you obtain a HELOC of $50,000 you may choose to take all of it at once or just some of it, leaving the balance of the $50,000 to be taken any time thereafter with your monthly payment being based on only what you have borrowed.

FIXED SECONDS:

A fixed second is another type of second mortgage that you may use to access some of the equity in your house. The fixed second is normally a higher rate than the HELOC, but it is fixed for a specific time period (15, 20, 25 or 30). Payments are generally higher than a HELOC, but you are paying both principal and interest. With a fixed second you have to take all of the equity that you are targeting at once. e.g. if you obtain a fixed second of $50,000 you must take the entire $50,000 at once.