Boston Bankruptcy Attorney

Types of Home Equity Loans

Home equity loans allow a person or family to obtain an amount of money from a bank that is secured by the home. They are borrowing against the value of their home. These loans come in two broad types, with a variety of interest provisions and repayment options available in each type.

The first type of home equity loan is also called a second mortgage. This is the more traditional version of a home equity loan. This type is received when a bank lends the borrower a lump sum amount that must be paid back with time, like a regular, first mortgage. Like other types of loans, the interest begins building as soon as the bank issues you the money for the loan.

Like all things in home financing, there is a newer version of the home equity loan. The new type is called a home equity line of credit. In this case, the bank gives the borrower a checkbook or credit card to make purchases. These purchases then accrue against the home’s equity. In this way, the credit card is more like an ATM card. Interest in this case does not begin to accrue until after the borrower makes the first purchase on the line of credit.

Both types of loans can be very useful and help a person get out of credit card debt or make improvements to the house. They both carry the same risk that if the borrower gets into trouble, the borrower’s home can be taken by the bank.

Contact a Boston Bankruptcy Lawyer

If you secured a second mortgage or home equity line of credit and are now behind on payments and fear foreclosure, contact the Boston bankruptcy attorney of Joshua Spirn & Associates at 1-800-975-5346 to determine which form of bankruptcy is best for your situation.