differences in HEL, HELOC, Mort (pay, rate, credit, charge)

[bgmv90]

What is the REAL difference between...
1. Home Equity Loan
2. Home Equity Line of Credit
3. Mortgage

Will different banks have different APR's? Or does it depend on your credit score?

[Tallysmom]

Originally Posted by bgmv90

What is the REAL difference between...
1. Home Equity Loan
2. Home Equity Line of Credit
3. Mortgage

Will different banks have different APR's? Or does it depend on your credit score?

A Home Equity Loan is a straight cash out second mortgage. You will charged (usually) a principal and interest payment.

A line of credit you are given a checkbook and a limit as to how much in checks you can write. Your payments are (usually) straight interest only for 10 years intul the line closes, and then it reverts into a P&I
payment to pay off the balance in another 10 years. This is a great loan for doing remodels paying as you go.

A mortgage is the home loan that sits in first position -- usually the largest of the loans. So if the lenders foreclose the first position loan gets satified first and what's left over goes to the second. The first mortgage features a much better term -- 30 year fixed.... and the second is usually a higher rate for a shorter term.

Yes -- rates depend on your credit score. Better credit score = better rates.

[Irish Eyes]

Great explanations by Tallysmom. I would also add that a HELOC usually has a variable interest rate. I'm not sure if that's always the case.

[chet everett]

Tallysmom is correct. The various lenders may offer some other marketing terms for the various kinds of loans they offer, but the terms of HELOC and HEL can generally be boiled down to how one gets the dough and how one is expected to repay the loan.

It is further true that lenders set their rates independently, and MOST lenders have periods of promotional rates that are BELOW the standard benchmarks for some period of time. Very stable and widely used benchmarks (like the LIBOR) are typically marked up by about 1.25% for those with the best credit scores and as much as four or five times that for those with an exceptionally poor risk of default.

[bgmv90]

Thanks.