Gresham Homeowners Have Two Options for a Second Mortgage – Home Equity Loans and HELOCs
Home equity loans and HELOCs are two types of loans that allow you to borrow against your home’s equity. Both of these loan options can be useful tools to Gresham homeowners. For example, if you need money for remodeling projects or to consolidate high-interest debt, then taking out a second mortgage may be a good choice for you.
Why Are Home Equity Loans and HELOCs Good Choices for Gresham Homeowners?
Both a home equity loan and a HELOC have interest rates that are typically much lower than other borrowing options available to Gresham homeowners. This makes taking a second mortgage out preferable to the alternative of taking out a personal loan or credit card. Also, because both of these loan types use your home as collateral, they may be easier to qualify for. Also, you ultimately get to choose how you use the money you get from these types of loans.
The Differences Between Home Equity Loans and HELOCs
Home equity loans and HELOCs each have their benefits and drawbacks. Gresham homeowners looking to take out a second mortgage must figure out which option works best for them.
Home Equity Loans
With a home equity loan, you receive the borrowed funds in a single lump sum. How much you are able to take out is limited by your loan-to-ratio value. This calculation takes into account your home value minus your existing mortgage and limits the loan to about 80% to 90% of that balance for those that qualify. Home equity loans are the more predictable of the two second mortgage options because they come with a fixed interest rate, fixed repayment term, and therefore, a fixed monthly payment. One thing potential Gresham borrowers will want to ask up front is if the lender charges a prepayment penalty. This way, if you want to pay the loan ahead of schedule you can know what to expect. Compare options to determine what is best for you.
HELOCs, or Home Equity Lines of Credit, is a line of credit you can borrow against when you need the money. As such, these loans are more like a credit card than a personal loan. In the end, you only pay back the amount you borrow. HELOCs also limit how much you can borrow, and usually allow for approximately 85% of your home’s value. Fees may be added onto this later. Interest rates can be variable based on an index, although some lenders allow customers to convert these to fixed rates. HELOCs have fixed borrowing and repayment periods – usually 10 years for borrowing and 20 years for repayment. You only pay back what you borrow in the borrowing period. Since monthly payments depend on how much you borrow and your interest rate, HELOCs are less predictable than home equity loans. It can be hard to tell what your monthly payment will be and it could even fluctuate over time.
Gresham homeowners who need extra cash may find that taking out a separate mortgage is a better option than other types of loans. However, careful consideration is the key when it comes to considering any type of loan – especially one that uses your home as collateral. For those in Gresham looking for advice on home equity loans and HELOCs, come down to Stonebridge Mortgage Group for sound professional advice.
Stonebridge Mortgage Group is Proud to Serve Gresham
For professional assistance with mortgages, look no further than Stonebridge Mortgage Group. You can rely on Stonebridge Mortgage Group to help guide you through the home buying process. If you’re ready to apply for a loan and want to go through the process online, Stonebridge Mortgage Group offers online applications. We also help get you pre-approved for a mortgage and help with your real estate loans and other mortgage solutions, both residential and commercial. Stonebridge Mortgage Group serves the greater Portland area and is located in Gresham, Oregon. Don’t wait to get quality assistance with buying your home!