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Your Guide to Second Mortgages/Home Equity Loans

Your Guide to Second Mortgages/Home Equity Loans


When you own a home, you build equity over time. This equity represents the portion of your home that you truly own, beyond what you owe on your mortgage. One way to utilize this equity is through a Home Equity Loan, which is sometimes referred to as a Second Mortgage.

Here's how it works: These types of loans allow you to borrow against the equity in your home without refinancing or selling it. This can be a great tool for helping you achieve goals like getting out of debt faster or remodeling your home. For more information about using a Home Equity Loan for debt consolidation, listen to Talking Cents with Heritage - Is Reducing Your Monthly Payments with Debt Consolidation Right for You? 

Let's illustrate a home equity loan with an example*:

To calculate home equity, we will take the appraised value - outstanding balance = available equity.

Imagine you purchased a $300,000 home with a down payment of 20%, or $60,000, and obtained a first mortgage of $240,000. After five years, you've paid down $30,000 of principal, and your outstanding balance is now $210,000. Meanwhile, the value of your home has appreciated to $350,000.

 In this example, you would take $350,000 - $210,000 = $140,000 (available equity). You could then use that available equity of $140,000 for a renovation project, debt consolidation, tuition or education, or other cost with the help of a Home Equity Loan. At Heritage, we offer Fixed Rate Loans and Flexible Home Equity Lines of Credit (FLEX-LOCK)

What is the difference between Fixed Rate and a FLEX-LOCK?

When it comes to tapping into the equity in your home, you have two primary options at Heritage: a Flexible Home Equity Line of Credit (FLEX-LOCK) and a Fixed Rate. While they both leverage your home's equity, they operate differently and offer unique benefits.


Heritage has a product called FLEX-LOCK. This is a Flexible Home Equity Line of Credit with unique benefits. A FLEX-LOCK operates much like a credit card, providing homeowners with a line of credit based on the equity in their home. Borrowers can draw on the FLEX-LOCK to cover various expenses, such as funding education costs, consolidating debt, or taking a vacation. This type of home equity loan offers many benefits, like locking in your interest rate, and a card with your FLEX-LOCK that is like a credit card and can be used for making purchases. You can also write checks from a FLEX-LOCK account. 

Fixed Rate

Similar to FLEX-LOCKs, Fixed Rate Home Equity Loans allow homeowners to access funds based on their home equity. However, unlike FLEX-LOCK and other Home Equity Lines of Credit, Fixed Rate loans provide a lump sum payment upfront, and repayment begins immediately. Interest rates on Fixed Rate loans are higher than those on primary mortgages but lower than alternative loan options, such as a credit card.

Key differences between a FLEX-LOCK and a Fixed Rate:
  1. Accessing Funds: With a FLEX-LOCK, you can access funds as needed, similar to how you would use a credit card. In contrast, a Fixed Rate provides a lump sum payment at the outset.

  2. Repayment Structure: FLEX-LOCK payments are based on the amount you've borrowed, whereas Fixed Rate payments are fixed and begin immediately after closing.

At Heritage, we have Banking Designed for you. Our trusted team of experts are here to help you navigate if a FLEX-LOCK or Fixed Rate is the right choice. Connect with a Relationship Banker today for more information. 

Ready to Get Started? 

Apply for a Home Equity Loan Online [LINK]

*Example ONLY. 

Property insurance may be required. Programs, rate, terms and conditions are subject to change without notice. Some restrictions apply. Subject to credit approval.

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