How Do Home Equity Loans Work

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Tips on Home Equity Loans....5

Home equity loans are secondary loans made to the principle mortgage on a house. Understand how home equity loans work on both ends with tips and advice from an experienced financial adviser in this free video.

Part of the Video Series: Investment Finance Tips
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Video Transcript

This is Patrick Munro, financial adviser, talking about how does home equity loan rates work. Basically home equity loans are secondary loans made to the principle mortgage. The mortgage is what's called the primary position on a piece of real estate. That's when you first bought your home, you took out a mortgage to buy the house. You put a down payment down under the guide lines of the bank. Over time you start to pay your mortgage down and then you see that your house is growing in value normally over time as well. Then you'll see that the equity position that you do have in your house is quite substantial. What you're able to do is take out a secondary line of financing from your same bank or a different bank. That particular mortgage is a secondary position and therefore, has a higher interest rate normally then the primary mortgage. This is how home equity line of credit interest work. And this is financial adviser Patrick Munro.


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