topic Re: HELOC as a 2nd mortgage?? in Mortgage Loans

HELOC as a 2nd mortgage??

Anonymous — Mon, 11 Apr 2022 17:03:16 GMT

We applied for and were approved for a HELOC through Navigant Credit Union in Rhode island.

The process went pretty smooth. 75,000 HELOC at Prime +0.5% which given our credit/equity seemed expected.

The part that seemed odd and which was a surprise today when we went in to sign was that is was being exexuted with a second mortgage. The word "mortgage" was not mentioned prior during this progress.

It doesnt buy out the exsisting mortgage. its a 2nd mortgage for $75,000 to secure the line of credit. I didnt sign, told them i needed to read more first to feel comfortable, which they were ok with. They were not pushy at all. they said this was pretty standard. I thought it would just be a line of credit and maybe a lein of some sort. "mortgage" threw up ared flag.

Is this normal? something to be concerned about? more details.

We close on our house 11/2020. 490K, we put down 30K and have paid off about 15K. We owe 445K. house was reappriased by the credit union doing the HELOC for 560K

Would prefer to do this with them, as they pulled our credit, approved us for what we wanted at the rate we want, and my wife may change to part time which may make future applications tougher.

any advice? is this normal? standard even? odd? walk away?

Re: HELOC as a 2nd mortgage??

dragontears — Mon, 11 Apr 2022 17:08:10 GMT

@Anonymous wrote:
We applied for and were approved for a HELOC through Navigant Credit Union in Rhode island.

The process went pretty smooth. 75,000 HELOC at Prime +0.5% which given our credit/equity seemed expected.

The part that seemed odd and which was a surprise today when we went in to sign was that is was being exexuted with a second mortgage. The word "mortgage" was not mentioned prior during this progress.

It doesnt buy out the exsisting mortgage. its a 2nd mortgage for $75,000 to secure the line of credit. I didnt sign, told them i needed to read more first to feel comfortable, which they were ok with. They were not pushy at all. they said this was pretty standard. I thought it would just be a line of credit and maybe a lein of some sort. "mortgage" threw up ared flag.

Is this normal? something to be concerned about? more details.

We close on our house 11/2020. 490K, we put down 30K and have paid off about 15K. We owe 445K. house was reappriased by the credit union doing the HELOC for 560K

Would prefer to do this with them, as they pulled our credit, approved us for what we wanted at the rate we want, and my wife may change to part time which may make future applications tougher.

any advice? is this normal? standard even? odd? walk away?

Clarification question:

Your concern is that a HELOC is second to your primary mortgage or that a line of credit secured by your house is being called a second mortgage by the lender?

Re: HELOC as a 2nd mortgage??

Anonymous — Mon, 11 Apr 2022 17:23:28 GMT

@dragontears wrote:
@Anonymous wrote:
We applied for and were approved for a HELOC through Navigant Credit Union in Rhode island.

The process went pretty smooth. 75,000 HELOC at Prime +0.5% which given our credit/equity seemed expected.

The part that seemed odd and which was a surprise today when we went in to sign was that is was being exexuted with a second mortgage. The word "mortgage" was not mentioned prior during this progress.

It doesnt buy out the exsisting mortgage. its a 2nd mortgage for $75,000 to secure the line of credit. I didnt sign, told them i needed to read more first to feel comfortable, which they were ok with. They were not pushy at all. they said this was pretty standard. I thought it would just be a line of credit and maybe a lein of some sort. "mortgage" threw up ared flag.

Is this normal? something to be concerned about? more details.

We close on our house 11/2020. 490K, we put down 30K and have paid off about 15K. We owe 445K. house was reappriased by the credit union doing the HELOC for 560K

Would prefer to do this with them, as they pulled our credit, approved us for what we wanted at the rate we want, and my wife may change to part time which may make future applications tougher.

any advice? is this normal? standard even? odd? walk away?

Clarification question:
Your concern is that a HELOC is second to your primary mortgage or that a line of credit secured by your house is being called a second mortgage by the lender?

Correct. My (probably irrational) concern was that a second mortgage was required/it is being called a 2nd mortgage by the lender.

im new to all of this, from what i read, nothing mentioned that, which im not against, i just didnt want to sign anything that said "mortgage" until i was clear this was normal and i didnt sign myself into the wrong thing.

im not against it being a 2nd mortgage or requiring one, just want to be clear this is a normal, common thing

Re: HELOC as a 2nd mortgage??

compassion101 — Mon, 11 Apr 2022 17:55:07 GMT

It seems standard according to a couple of sources. So I wouldn't worry much about it unless someone more knowledgable has other information.

Investopedia says:

"If a borrower falls behind on payments, the lender can seize the home, or collateral, in a process known as foreclosure. The lender then sells the home, often at an auction, to recoup its money. Should this happen, this mortgage (known as the “first” mortgage) takes priority over subsequent loans made against the property, such as a home equity loan (sometimes known as a “second” mortgage) or home equity line of credit (HELOC). The original lender must be paid off in full before subsequent lenders receive any proceeds from a foreclosure sale"

Nerdwallet says:

"A home equity line of credit, or HELOC, is a second mortgage that gives you access to cash based on the value of your home. You can draw from a home equity line of credit and repay all or some of it monthly, somewhat like a credit card."

As a side question, I thought HELOCs generally won't give you more than 80% or maybe 90% of the value. If appraisal was 560k then 80%=448k less 445k you owe =3k HELOC, or at 90% 560 x .9 = 504-445=59k. Yet you said they are giving you 75k. I'm just trying to learn about what/how they are able to loan you?

Re: HELOC as a 2nd mortgage??

Anonymous — Mon, 11 Apr 2022 18:24:21 GMT

they basically raised our rate to give us extra cash. we originally qualified for primer minus 0.5.

@compassion101 wrote:
It seems standard according to a couple of sources. So I wouldn't worry much about it unless someone more knowledgable has other information.

Investopedia says:
"If a borrower falls behind on payments, the lender can seize the home, or collateral, in a process known as foreclosure. The lender then sells the home, often at an auction, to recoup its money. Should this happen, this mortgage (known as the “first” mortgage) takes priority over subsequent loans made against the property, such as a home equity loan (sometimes known as a “second” mortgage) or home equity line of credit (HELOC). The original lender must be paid off in full before subsequent lenders receive any proceeds from a foreclosure sale"

Nerdwallet says:
"A home equity line of credit, or HELOC, is a second mortgage that gives you access to cash based on the value of your home. You can draw from a home equity line of credit and repay all or some of it monthly, somewhat like a credit card."

As a side question, I thought HELOCs generally won't give you more than 80% or maybe 90% of the value. If appraisal was 560k then 80%=448k less 445k you owe =3k HELOC, or at 90% 560 x .9 = 504-445=59k. Yet you said they are giving you 75k. I'm just trying to learn about what/how they are able to loan you?

Re: HELOC as a 2nd mortgage??

Anonymous — Mon, 11 Apr 2022 20:16:39 GMT

Current loan processor here to chime in. Yes, a HELOC is also known as a Second Mortgage because it is a loan that is secured by your home. It will be notated on your credit report as a Home Equity Line of Credit or Second Mortgage and the account type will always be classified as a mortgage.

Re: HELOC as a 2nd mortgage??

donkort — Mon, 11 Apr 2022 21:16:57 GMT

If I'm correct:

I would say a HELOC is a type of "second mortgage."

Re: HELOC as a 2nd mortgage??

tferdaise — Tue, 12 Apr 2022 15:39:02 GMT

Would you know of a mortgage company that gives a HELOC to someone who doesn't have a A+ credit (620 score)?

Re: HELOC as a 2nd mortgage??

Citylights18 — Wed, 13 Apr 2022 09:03:21 GMT

@donkort wrote:
If I'm correct:

I would say a HELOC is a type of "second mortgage."

I would say also the term "second mortgage" has fallen out of favor over the years because of connotations that it was an indicator of financial distress. No bank that I am aware of markets their home equity products as a second mortgage anymore.

Builders still will offer financing packages whereby your downpayment comes in as a second mortgage, which effectively is no different than a home equity loan. A first trust and a second trust I've seen it called before builder-lender statement.