If you are like most homeowners, you
probably have a first mortgage loan on your home. Typically, such loans are for 25 to 30
years, with the monthly payments adjusted so that the loan is paid in full at the end of
As you make monthly mortgage payments and
the value of the home increases, your interest in the property (called "equity")
grows. After a while, some homeowners may wish to borrow against the equity in their home
to get cash, to make home improvements, to educate their children, or to consolidate
personal debts. Because such loans are in addition to the first mortgage on the home, they
are commonly called second mortgage loans.
Second mortgage loans are different from
first mortgages in several ways. They often carry a higher interest rate, and they usually
are for a shorter time, 15 years or less. In addition, they may require a large single
payment at the end of the term, commonly known as a balloon payment.
Traditionally, second mortgage loans are
offered with a fixed loan amount and a predetermined repayment schedule. Some lenders now
offer lines of credit that allow you to obtain cash advances with a credit card or to
write checks up to a certain credit limit. These often are called "home equity
lines" because the equity in your home is collateral for the amount of credit you
request. As you pay off the outstanding balance, you can reuse the line of credit during
the loan period. America Mortgage Online provides answers to some common questions people
ask when they begin shopping for a second mortgage or home equity loan.