Suppose you are looking to take out a loan or second mortgage on your property to free up some additional money for home improvements, a new car or something luxurious. In that case, you may be wondering which option is best for you, a second mortgage or a home equity loan.
A second mortgage is a loan secured against your property. The total value of mortgages against your home is usually 80% of its value, so the lender will only lend you up to that amount. Your house also secures a home equity loan, but it doesn’t have any limit on how much money you can borrow.
Mortgages are more popular because they offer lower interest rates and extended repayment periods than home equity loans. Interest rates on a home equity loan can be a lot higher than a standard mortgage deal.