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Any loan that is secured by your home is an Home Equity Loan. If your home is worth $500,000 and you have a $300,000 mortgage, you have $200,000 in equity. Your current loan to value is 60% (300,000 loan / 500,000 value = .60 loan/value).
If a lender said they could lend up to 90% loan to value on a 2nd mortgage then the math would look like this:
$150,000 would be the maximum Home Equity Loan you could take out using these terms.
Home Equity Loans are most often 2nd mortgages as most homeowners already have a 1st mortgage but it doesn’t need to be that way. Should a homeowner own their home free and clear and decide to take out a Home Equity Loan then that loan would be a 1st mortgage. Whether it is a 1st or 2nd mortgage just means how it is recorded on title, that’s it.
A home equity loan just means it is a loan secured by the equity you have in your home. Terms will vary depending on the lender you work with.
