HELOC's
A home equity line of credit, or HELOC, is a second mortgage that lets you convert some of your equity in your home back into debt in exchange for cash. Borrowers often use HELOCs to finance home improvement projects, educational expenses or debt consolidation.
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The interest rate on a HELOC tends to be lower than rates on credit cards and personal loans. Lenders use your loan-to-value ratio, or LTV, to decide if you have enough equity for a HELOC.
Closed End Seconds
A closed-end second (also known as a “closed mortgage”) is a common type of mortgage in which the lender provides you with a lump sum of financing. You then repay the mortgage in by a certain date in monthly payments that include interest and principal. Unlike open-end mortgages, you cannot extend the amount of the principal or reuse it as you pay down the loan.
HELOC vs Second Mortgage...
Both a home equity line of credit (HELOC) and a second mortgage (such as a home equity loan) let you borrow against the value of the home equity that you’ve accumulated. They both use your home as collateral.
However, a HELOC allows you to draw money from a line of credit, while you get a lump sum if you take out a second mortgage. With a second mortgage, the repayment period, interest rate, and monthly payment amounts are usually fixed.
With a HELOC, the interest rate and monthly payments can change over time. In addition, the repayment period for a second mortgage is usually shorter than the repayment period for a HELOC.
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Standalone HELOC
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WHAT IS A STANDALONE HELOC?
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Tied to a property that has an active mortgage attached to it
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The HELOC and the active mortgage do not need to be from the same lender
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FICO as low as 620
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Primary, second home and investment properties – 1-4 units
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2-4 units only eligible on primary residence
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Max CLTV/HCLTV as high as 90%
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Max DTI 50%
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The interest rate and monthly payments can change over time
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Piggyback HELOC
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WHAT IS A PIGGYBACK HELOC?
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Also referred to as a 2nd, Simultaneous Close HELOC
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The HELOC is done at the same time as the first mortgage on the subject property
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Typically done with a purchase transaction to help the buyer have enough money to close on the purchase
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Primary, second home and investment properties – 1-4 units
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2-4 units only eligible on primary residence
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FICO as low as 680
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Max CLTV/HCLTV as high as 90%
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Max DTI 50%
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Non-occupant co-borrowers are permitted
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Closed End Second
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Not allowed to go towards purchasing a new primary
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Used for personal, family or household purposes
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Can be used for purchase of investment properties or Second homes
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Lump sum dispersement of money at closing
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FICO as low as 680
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Fixed Rate
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Closed-end mortgages are one-time loans, not revolving lines of credit
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The repayment period, interest rate, and monthly payment amounts are usually fixed