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Weighing the benefits between a second mortgage versus a home equity loan requires an understanding of the differences. While the terms are closely related, there are a few key points that separate them.

Second Mortgage

• More similar to a mortgage
• Based on the value of the home
• Fixed sum of money given up-front
• Repaid on a fixed payment schedule similar to a mortgage
• 5 to 30 years at a fixed rate

Home Equity Loan

• More similar to a credit card or line of credit
• Based on your current equity in a home
• You determine how much of your equity line you use each day or month like a credit card
• Monthly payments are due based on your expenditures
• Rates may be adjustable while the credit line is open

The option you choose will depend on your creditworthiness, spending habits and financial needs. Often, one-time purchases are better handled through second mortgages and recurring payments are suited for home equity loans. Your ability to control your spending on a credit card should also be considered. Speak with your lender to see which option will be less expensive based on these factors.