Subordinate Financing – Comparables
Product Name
Second Mortgage
HELOC – Home Equity Line of Credit
HELON – Home Equity Loan
Definition
A second mortgage is a loan made in addition to the homeowner’s primary mortgage. The difference between the home’s current market value and any remaining mortgage payments is called home equity. A homeowner may decide to borrow against their home equity to fund other projects or expenditures. The loan they take out against their home equity is a second mortgage, as
You’re borrowing against the available equity in your home and the house is used as collateral for the line of credit. As you repay your outstanding balance, the amount of available credit is replenished – much like a credit care. You can choose to use some or all of your credit line, and you are charged interest based on only the amount that you’ve actually borrowed. So, if you haven’t used any of your line of credit, you won’t owe any
A home equity loan is a secured loan that allows you to borrow a set amount against your equity at a fixed interest rate and repayment term, similar to a home mortgage. It’s very similar to a HELOC except with a HELON you need to be sure of the amount needed because you’ll be paying interest on the balance.
Interest Rates
Variable/Fixed
Variable
Fixed
APR’s
Slightly Higher
Slightly Lower
Slightly Higher
Funds Disbursement
Lump Sum
Line of credit
Lump Sum
Repayment Terms
10yr, 15yr, 20yr, 25yr, 30yr fixed or variable terms with I/O (Interest Only) options available
I/O or Interest Only payments for the first 5-10 years of the loan. The remaining term, whether it’s 10 or 20 years, will convert to a fully amortized loan and you’ll begin paying off the principle balance of the loan.
Fixed fully amortized loan term. 5yr – 30yr terms. I/O or Interest Only options available
Prepayment Penalty
YES – varies on lender, program, term
YES – varies on lender, program, term
YES – varies on lender, program, term
Refinance allowed?
YES
YES
YES