Home Equity Loan VS Mortgage. There is a big difference and you should know about each of them.
Hey gang, Michael Lush again. Wanted to talk today about the differences between a mortgage and a Home Equity Loan. See, a mortgage is a compounding interest, closed-end loan. Meaning, money can only go in, it cannot come out.
It's usually in first lien position, so when you buy a house, you get a mortgage. That's what 99.3 percent of all Americans do. Now that's a mortgage. Let's talk about a Home Equity Loan. A Home Equity Loan is typically a second lien position. Basically, a second mortgage behind your first mortgage. Really, it's just more debt, with the same problem of having the wrong product to use to pay off your home.
Instead, I actually recommend using a Home Equity Line of Credit. In fact, in Australia, 80 plus percent of citizens use a Home Equity Line of Credit instead of a mortgage. They call it a "Offset Account". They also happen to be the highest population of second home ownership, probably because they can pay for two homes in half the time that it takes Americans to pay for one.
Again, we recommend using a Home Equity Line of Credit, treating like your savings and checking account, and you'll accelerate the payoff of your home much faster, and actually, much easier, than paying off a mortgage.
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