BOULDER, CO, Apr 20, 2024—If you're looking into further financing options on a home you already own, you may have heard the terms "second mortgage" and "home equity line of credit." But what are they, and how are they different?
"A second mortgage is a loan against the equity in your home," explains Phil Boren, Broker Associate of RE/MAX of Boulder, Inc.. Financial institutions will generally let you borrow up to 80 percent of the appraised value of your home, minus the balance on your original mortgage.
You may incur all the fees normally associated with a mortgage, including closing costs, title insurance and processing fees.
"A home equity loan, like a second mortgage, lets you tap up to about 80 percent of the appraised value of your home, minus your current mortgage balance," says Boren. But because it is set up as a line of credit, you will not be charged interest until you actually make a withdrawal against the loan, although you will be responsible for paying closing costs.
The withdrawals can be made gradually as you begin to pay contractors and suppliers for handling your remodeling project.
"The interest rates on home equity loans are usually variable," says Boren. Of particular importance: make sure you understand the terms of the loan. Boren continues: "If, for example, your loan requires that you pay interest only for the life of the loan, you will have to pay back the full amount borrowed at the end of the loan period or risk losing your home."
For information on real estate, please contact RE/MAX of Boulder, Inc. at philboren@gmail.com, 303-441-5647, or RE/MAX of Boulder, Inc..
Phil Boren is a 26-year veteran real estate Broker and Realtor, specializing in consulting with buyers and sellers in Boulder, CO and along the Front Range of Northern Colorado. Held Real Estate Broker's license in Texas, California and Colorado; Managing Broker for over 200 agents and Brokers for Century 21 and RE/MAX franchises. Award-winning Realtor with experience in management, sales, marketing, relocation, appraisal, REO, BPO's, foreclosures, short sales; previously held the MAI designation from the Appraisal Institute. Experienced in both residential and commercial real estate and achieved the No. 14 individual ranking in the 5-state, Mt. States Region for RE/MAX International in 2001, based on sales volume. Received my BSBA in Finance and Real Estate from the University of Arkansas in Fayetteville, where he was a 4-year starter and 4-year football letterman for Hall-of-Fame coach, Lou Holtz.