What is home equity?
Home equity is the difference between the value of your home and the amount that you still owe on the mortgage. For example: If your home is valued at $200,000 and you owe $150,000 on the mortgage, then your home equity is $50,000.
What is a home equity loan?
A home equity loan is a secured loan. The collateral securing the loan is your home. Just like your primary mortgage, if you default on a home equity loan, you could lose your home.
What is a cash-out refinance?
A cash-out refinance is a home loan in which a new mortgage is issued that is greater than the unpaid principal balance of the existing mortgage. It differs from a home equity loan in that it is a new mortgage and not a second mortgage. Both cash-out refinances and home equity loans allow you to tap into your home’s equity.
What is a second mortgage?
A second mortgage and a home equity loan are the same thing. Second mortgage is just another name for a home equity loan.
What’s the difference between a revolving line of credit and a closed-end loan?
With a closed-end loan you receive all of your loan proceeds up front in a lump sum and your monthly payments are fixed for the duration of the loan term. With a revolving loan you receive a credit line in which you can write checks to borrow up to your available credit limit at any time during the life of the loan. The rate is usually an adjustable rate. Your payments will vary depending on your outstanding balance and the current interest rate.
After a person gets a new mortgage, how long must you wait before refinancing?
Unless there is a prepayment penalty clause in a mortgage, you can refinance anytime. However, some lenders do require that your existing loan have at least 3 months seasoning before they will approve you for a new mortgage.