Second Mortgage Options: Unlock the Value of Your Home

As homeowners, many of us have considered tapping into our home's equity to fulfill financial needs, such as home renovations, consolidating debt, or unexpected expenses. However, if you already have a first mortgage with a low interest rate, you might be hesitant to touch it. The good news is there are several second mortgage options available that allow you to utilize your home's equity without jeopardizing your favorable first mortgage rate.

In this blog post, we'll explore some of the most popular second mortgage options, including Home Equity Line of Credit (HELOC), Home Equity Loan Amortized (HELAM), and adjustable rate loans, as well as discuss how to determine which option is the best fit for your needs.

Home Equity Line of Credit (HELOC): A Flexible Choice

A Home Equity Line of Credit (HELOC) is a popular and flexible second mortgage option. It operates as a revolving line of credit that you can continually advance and pay down on throughout the life of the loan. This means you can borrow as much or as little as you need, up to your maximum credit limit, and only pay interest on the amount borrowed. Some of the main advantages of a HELOC include:

Interest rates are typically lower than credit cards and personal loans
Flexible payment options, allowing for interest-only payments or larger principal and interest payments
Potential tax benefits, as the interest paid on home equity loans may be tax-deductible (consult your tax advisor for more details)

Home Equity Loan Amortized (HELAM): Fixed Payments for a Fixed Plan

As opposed to the flexibility of a HELOC, a Home Equity Loan Amortized (HELAM) is a closed-end second mortgage option that offers borrowers a fixed interest rate and a lump sum of funds. A HELAM may appeal to those who prefer a stable payment structure and specific repayment timeline. Some benefits of a HELAM include:

Fixed interest rate, offering stability and predictability for payments
Funds are disbursed all at once, making it an excellent option for large, planned expenses
Repayment terms up to 15 years for manageable monthly payments

Adjustable Rate Loans: Customizable Terms for Your Needs

For those who prefer an adjustable interest rate option, an Adjustable Rate Loan might be a suitable choice. With this type of second mortgage, the interest rate can change periodically depending on market conditions, and the funds are disbursed all at once. With adjustable rate loans, you can tailor your loan terms to best align with your financial goals and budget requirements. Some benefits of adjustable rate loans include:

Lower initial interest rate
The rate is set for a period of time and then adjusts after that period is up
Customizable loan terms to fit your budget and financial goals

Find the Perfect Second Mortgage Option for You

Navigating the world of second mortgages can seem overwhelming, but the best part is—you don't have to do it alone. Our mortgage team has over 130 years of combined banking experience to help you explore the best second mortgage option for your unique needs.

Mortgage team