Foreclosure
12 September 2007
Foreclosure doesn't just happen to people who don't make their mortgage payments. Your homeowner's association (HOA) can take your house or condo if you're not careful. In one case, a disabled California man lost his home in a foreclosure sale because he was $123 behind on his homeowner's dues. The house was worth $280,000. Unfair? Abusive? You bet!
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12 September 2007
Foreclosure doesn't just happen to people who don't make their mortgage payments. Your homeowner's association (HOA) can take your house or condo if you're not careful. In one case, a disabled California man lost his home in a foreclosure sale because he was $123 behind on his homeowner's dues. The house was worth $280,000. Unfair? Abusive? You bet!Read More »
Second Mortgage Loans versus Home Equity Lines of Credit
By Sarah ClarkNFNS Columnist
Home equity lines of credit and fixed second mortgage loans are two ways to borrow money against your home. Which one is right for you? Here's some information to help you decide.Second mortgages, or notes positioned behind your first mortgage, come in two forms: home equity lines of credit and fixed second mortgages. Fixed second mortgages deliver a lump sum at closing, while home equity lines of credit, or HELOCs, are revolving accounts -- like credit cards -- and give you access to the equity in your home over an extended period during which you can draw and repay funds as needed.
Fixed Second vs. HELOC
The Federal Reserve recommends fixed second mortgages to borrowers who have a specific amount in mind and need all the money right away. For example, a borrower who needs $50,000 for a medical procedure or to consolidate a lot of unsecured debt would probably want a fixed second mortgage--these loans feature stable payments and generally lower rates. Borrowers who want access to money for home improvements that are expected to be spread over a long time, for recurring college tuition payments, or as a hedge against a financial emergency will most likely opt for the flexibility of a HELOC.Costs of Home Equity Loans: Annual Percentage Rate (APR)
APR calculations include both the stated interest rate and the fees charged to obtain the loan. Fixed second mortgage loans feature rates that won't change, and HELOCs carry adjustable rates that some lenders allow to be fixed at some point during the life of the loan. APRs of fixed rates can't be readily compared to APRs of adjustable rate loans--use the APR to compare the same kind of loan when selecting a lender or program.Costs of Home Equity Loans: Loan Fees
Second mortgage and home equity loans generally cost much less than first mortgages to obtain--they may even be offered at no charge--but carry higher rates. Most of these loans also include a penalty of about $500 if you close them out within three years of opening them--something to keep in mind if you plan to sell your home any time soon.Source
The Federal Reserve
About the Author
Sarah Clark is a freelance writer specializing in a variety of consumer topics.
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