Basically, these two types of loans require the guarantee of ownership. However, there are slight differences between the two. The mortgage style loan is usually where the home purchased is used as collateral against the loan, while the equity in the home is where the existing property is used as collateral for getting a second loan. Both are legal entities that are fairly compatible means to acquire funds.

Second mortgage loan

Second mortgage loan

The home equity loan also known as the second mortgage loan is generally divided into two categories which are the fixed rate loan and the home equity lines of credit.

Fixed rate loan


The fixed rate loan provides a simple one-time payment to the borrower that is repaid over an agreed period of time, with the addition of added interest changes. The payment amount and interest earned remain fixed throughout the payment period. With respect to home equity lines of credit, it works much like credit card advances.

Interest and repayments

Interest and repayments

The amounts granted are fixed and can be withdrawn according to the needs of the borrower. Interest and repayments are not fixed and are calculated based on current available rates. Payments are also billed only on amounts withdrawn and not only on the total sum advanced, if not used in full, thus creating a simple and easy source of cash.

The mortgage is also a fairly simple and effective style of fundraising to secure the purchase of property. The risks of the lender are relatively low because the amounts lent are generally lower as a percentage of the real value of the property.

The borrower will also be checked for suitability and credit history before loans are granted. In this scenario, the lender is fully covered, because in the event of default by the borrower, the lender is able to recover the unpaid amount in the form of the property.

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