Should I Get a Mortgage or Home Equity Line of Credit for My House?

A second mortgage or home equity line of credit will help pay off bills or put an addition on a home.

Second Mortgage

A second mortgage offers homeowners one fixed loan with fixed payments over a specific amount of time. The Federal Reserve suggests this is the best type of loan for a large payment of a single item, such as an addition to a home.

Home Equity Line of Credit

A home equity line of credit is similar to a credit card with a revolving line of credit that can be paid back in a lump sum or monthly payments, which vary depending upon how much is borrowed. The Federal Reserve says a revolving line of credit is good for paying off medical bills, school tuition and smaller home improvement projects.

Bottom Line

When deciding which loan option to choose, consider how you will use the money. A second mortgage seems to be a good choice if needing money in one lump sum for an addition or other large purchase, while a line of credit is best suited to pay off other bills, medical payments or minor household repairs.

References

• Federal Reserve Board: Home Equity Lines of Credit
• Mortgage Loan: Home Equity Line of Credit