HELOC's versus Closed End Seconds
Key Benefits
- Cash Back
- Avoid PMI or MIP charges with a 1st & 2nd COMBO
- Home Improvement, Cash Back, College Tuition, Credit Card Payoffs, Pool, Patio, ANYTHING!
No lenders are currently offering mortgage brokers in the state of Arizona any type of second mortgage. They currently DO NOT EXIST!!!!! Some banks continue to offer their seconds directly.
Your Options
There are two separate types of "2nd mortgage loans". Home Equity Lines of Credit and Closed End Seconds. The difference....HELOC's usually are set up like a giant credit card attached to your home as collateral. HELOC's are also based on an adjustable rate....PERIOD. The rate is usually the Wall Street Journal published prime rate plus a margin (Lender's profit). As prime rate changes (goes up) so does your payment. A Closed End Second is a second mortgage that has a fixed rate that will not change and, eventually, the entire loan will be paid in full. You also receive the entire loan amount back to you (cash or check) as soon as it funds. A HELOC can be open and yet never actually used.....just like a credit card. If you use it and the pay it off....you can use it again. A Closed End Second is a one-time shot.
Pricing
Depending on many conditions, such as Dollar Amount, CLTV, Home Value, Credit Score, Debt Ratio and loan purpose to name a few.....HELOC's start at prime with a 0.0% margin and go up to about prime with a 3.500% margin. Don't forget that they do adjust with the market. HELOC's interest is not always tax deductible. Consult a tax professional for more info.
Closed End Seconds start at about 7.375% and go up to about 13% depending on many variations. Remember that a Closed End Second is at a fixed rate that will never change. Also, these Seconds interest payments are typically, FULLY tax deductible....just like a First Mortgage. Consult a tax professional for more info.
| Description | Base Rate | Top Rate |
|---|---|---|
| HELOCs | 8.00% | 13% |
| True 2nds | 7.375% fixed | 13% fixed |
PRIME rate is now at 8.00%. Just this past June of 2004....it was only 4.00%. Everyone's rate on a HELOC went up 4.000% in just 36 months. Those that listened to the experts at Mortgage Central, their rates did not move because they all chose the FIXED rate seconds.
The pricing on HELOCs or Seconds is tough to quote. There are literally thousands of different combinations that change in 1/10th increments. I can say that the average rate for a HELOC is about 9.750% (as a start rate) and the average FIXED rate for a closed end second is about 9.500%.
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