| Home equity mortgage loans can be very helpful | | | | is a closed end loan, where you receive a single |
| when you need a lot of money to pay for things like a | | | | payment similar to a regular loan. The second variety is |
| unexpected medical expenses, college tuition or any | | | | an open end loan and acts more like a credit line. You |
| other large expense. This type of loan is often | | | | can borrow money at any time up to the limit of the |
| confused with other more common types of loans, so | | | | equity in your home. |
| we will try to demystify it by answering some | | | | Question: What are the specifics about a closed end |
| common questions. | | | | loan? |
| Question: Are there any other names for this type of | | | | Answer: You receive one payment after the loan is |
| loan? | | | | closed, and no more. The maximum amount you can |
| Answer: Yes. They are often known as home equity | | | | borrow is 100% of your equity, or more if your lender |
| loans, and sometimes as second lien loans. | | | | offers you an over equity loan. This will be determined |
| Question: How does this type of loan work? | | | | by your lender based upon your income level, credit |
| Answer: They are made against the equity of your | | | | history and how much equity you have in your home. |
| home, reducing the equity in your home. They are | | | | The interest has a fixed rate that can be amortized up |
| always made by the same lender who holds your first | | | | to 15 years. Depending upon the loan conditions |
| mortgage lien. | | | | determined by the lender, it may be possible to make |
| Question: Do I have to make separate payments for | | | | balloon payments to reduce the amortization. |
| these loans? | | | | Question: What are the specifics of the open end |
| Answer: Not necessarily. Second lien loans can be | | | | loan? |
| bundled with your first lien payments. Any amount over | | | | Answer: Open end loans are sometimes referred to |
| your first lien payment will automatically be applied to | | | | as home equity lines of credit. In essence, you have full |
| your second lien. | | | | control over when and how much you borrow from |
| Question: What kind of qualifications are there for this | | | | the loan. The credit limit is usually limited to 100% of |
| type of loan? | | | | your home equity and is computed similar to closed |
| Answer: You must have a good credit history and a | | | | end loans. The interest has a variable rate, and the |
| reasonable amount of equity in your home to be | | | | term may be extended up to 30 years. |
| approved for this type of loan. | | | | Question: Are there any special costs associated with |
| Question: How are these loans different from other | | | | this type of loan? |
| types of loans? | | | | Answer: Yes. Lenders will commonly add processing |
| Answer: These loans come in two varieties. The first | | | | fees to home mortgage equity loans. |