what is the differance between a line of credit on your home and a home equity loan?

Question

I have filed bankruptcy 1/ half years ago and I own the house with my 80 year old mother and we need work done on the house.
She was told this is the best way. Or I should say the only way. This is for 30 years at 7.99%. Low payments of $156 a month but we were wondering if she got sick or I did if the payments were behind would they forclose. What does it mean when they say they would probably take a lein on the house. Isn't a lein and a line of credit the same?

Answer 1

First ...a line of credit and and a home equity loan are two different things. A line of credit on your home means that the lender has appraised your home ...and lets say they found it to be worth 120,000 and the balance owed on the home was maybe 75,000...The lender would give you a line of credit for maybe 25,000 and you would draw off that line of credit for the house repairs.
In the case of a home equity loan...the lender would give you a check for 25,000 and you would get the repairs done and pay for it out of that check. In either case there are fees involved which are rolled into your payments as well as the interest. The lender chrages fees for the appraisal of your home, fees for securing the loan for you (based on your credit risk) as well as interest.
If you miss a payment or two ...the lender can force you to sell your home and pay the balance of the loan. The loan in either case constitutes a lien against your home ...which gives the lender the right to force you to sell and re-pay them if you are late with your payments...which is forclosure.

Answer 2

A lein comes with getting a line OR loan against a house. Taking a lein means they would act on it- as in try to forclose on your home. However, based on the agreements it would depened if you have a first mortgage, etc. What you need to keep in mind is that a loan or line of credit is exactly that - a second mortgage against your home. If you are at all unsure it's better to have a lawyer look over the agreement before you sign anything! A loan is only different because it is a locked in term and rate. A line means you don't have a set time to pay it off because it is revolving, and also as prime rate goes up so will your rate, so be careful with that. I would shop around a lot before you lock into anything. Try lendingtree.com.

Answer 3

Hmmmm . . . WOW -- you're scaring me.

If you don't pay on a MORTGAGE LOAN HECK YES THEY WILL FORECLOSE!

You've asked way too many questions . . . what's the difference between a LOC and an equity loan? Can they foreclose if we don't pay the mortgage? Isn't a lien (the correct spelling) the same as a line of credit!

A line of credit is similar to having a CREDIT CARD. You use the LOC only when you need to. Like a credit card, you use it when you need to.

You may have a LOC for $10,000. That is an OPEN LINE OF CREDIT that you can use (FOR EXAMPLE, please do not take this as literal. I'm ONLY using the $10,000 as an example). You need housing repairs, and they cost $2,500. So you use $2,500 line of credit, and make payments on that amount. You will still have $7,500 in your LOC account to use, if you need to.

The difference is that a LOC is SECURED.

There are two types of "credit" . . . secured credit and unsecured.

A credit card is UNSECURED credit. The credit card company does not come in an confiscate the goods you bought on the credit card if you don't pay the bill. If you buy a pair of shoes on the credit card, and you don't pay the bill, the credit card company doesn't come in and take the shoes. Understand?

A line of credit is SECURED credit. The property is "securing" the amount of money borrowed. So if you have a line of credit, and DO NOT PAY the monthly debt, the property secures this.

Same with a car. It is SECURED. You don't pay the car note, they will reposses the car . . . it's their secuirty. It's not your car, you still owe.

A LIEN is a legal term for the process of "claiming" the property. If you OWE someone money, and your house was use to SECURE that loan, and you DO NOT PAY THE LOAN, your property can have a lien placed on it which is a legal procedure which allows someone to lay claim to money owed . . . through the equity in the house. EXAMPLE, you want new windows, and hire a company to put in new windows. You don't pay for this, the window company files a LIEN on your property for the amount you OWE THEM for the windows. They have the legal right to EXECUTE the LIEN . . . and can force you to sell the home to pay them.

An EQUITY LOAN is a loan. It is not a LOC. There is a SET amount you borrow, and it's not open-ended as a LOC.

The loan is made based on the equity in the property.

Please DO NOT do anything that would jeopardize your grandmother's property.

You do not sound too bright. Asking these questions is good, but I hope you understand the answers.

Do NOT USE your house as a bank. Try NOT to borrow against it. If you borrow money -- either on a Line of Credit OR a equity loan -- and you don't make the payments you can lose the house.

You want this for your 80-year old grandmother??

You already have done a poor job with your money, credit, debts -- you've gone BANKRUPT! Please don't do this to your grandmother.

Try to get a loan through a seniors center in your local area. In my city we have programs for elderly people if they need help to fix up their homes. LOW INTEREST loans. Please try a local community agency before you talk to lenders.

Answer 4

It is possible to go into foreclosure that is something that I would talk to your loan officer about... a line of credit is kind of like a credit card you have an open amount you can use the money for...a loan is a disbursed all at once. A lien is what they put on the property when there is a loan on it... which means they could foreclose on the property. If you have a first loan and then a line of credit or a second loan the it would go in the order that they put the lien on it... first loan and then second. Sorry I can't be much help.

Answer 5

A lien is a document a lender has to secure their money if you did get sick, or die. It is paid back before the title can be free and clear to be placed in the new owners name should you sell. If you do not pay it back, they can demand repayment. It protects the lender.

A line of credit is the dollar amount they will give you against the home value. Home equity loans is the name of the type of loan. Equity is the difference between what is owed and what the appraised market value is. If you own it outright, you are basically dipping into your equity to finance your improvements.

Answer 6

A line of credit is like a credit card. You can spend up to a certain limit. You pay interest on the amount you owe. You can pay it back then borrow again, as long as the account it still open.

An equity loan means they give you all of the money up front. You make regular payments to pay the money back. You cannot pay the money back then borrow it again.

A lien on the house mean that if you default on the loan then they can foreclose on the house.

Answer 7

both are the same. referred to as a HELOC (home equity line of credit) or a lien against your house. depending on your amount, taking it for a 30yr period is insane. you'l actually be paying double even triple what you initially borrowed due to the finance charges. helocs are generally around 5-10 years repayment depending on the loan amount. you COULD refinance and get some cash out as well as lowering your rate. even with perfect credit, 2nd loans and HELOC best rates are no less than 8.5% and that's WITH perfect credit, without it you can expect to pay lots more in rate.

Answer 8

A home equity loan is when they hand you a check for 20,000 and you make monthly payments at a set rate.

A line of credit is when you get a check book and write checks at your disposal and then you get a bill that you pay off slowly

Answer 9

Home equity loan you have to take all the funds at closing, A line of credit you draw upon at your will and only pay interest on the funds you take.

Answer 10

A Second morgage is a credit line and a home equity loan is a open loan that has a flexable intrest rate.