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Standard Home Equity
Loans
A standard home equity loan is a loan against
the amount of equity in your home. The amount is given in
one total amount, and it usually has a fixed monthly payment
and interest rates. This type of loan is sometimes considered
a second mortgage.
You have many options that will determine the amount you
will pay over the term of the loan.
But because lenders are taking a larger risk with home equity
loans than a first mortgage, interest rates are usually higher
on the second mortgage.
Loan terms are usually shorter for home equity loans / second
mortgages as well, and a loan term can be anywhere between
3 - 15 years in length. Keep in mind that the longer the term,
the more money you will be spending in interest over time
(just in smaller monthly payments).
If you sell your home, be aware that all lenders will collect
their payment first. The primary mortgage is paid off first,
then the second mortgage. Any left over amount is given to
the borrower. If the sale of the house does not cover both
loans, the borrower will still be responsible for paying off
any outstanding balances.
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