AuthorTopic: Closed HELs
pers
@2007-04-30 10:25:21
Anyone knows the difference between the Home Equity Loans and the normal residential mortgage ? they both sound the same thanks
ncfa
@2007-04-30 20:33:19
ye they kinda same but the mortgage normally results in a single large advance as compared to loans which r in small instalments. but this is not an international standard practice , it differs from bank 2 bank .

thx
jmcneal
@2007-05-01 01:02:29
HEL's are usually open lines of credit on a home which has an existing mortgage. For example you have a home but want to add a new room, you can take out a HEL which borrows from your equity and gives you cash. A normal mortgage is to actually acquire the home and HEL is based off the fact that you already have equity(ownership stake) in the home. Hope this helps
volkovv
@2007-05-10 16:07:34
That is not necessarily true, HELs could also be close-ended loans, such is first or second lien on a property that is used to buy a new property, which is similar to just taking a regular mortgage. HELs, usualy are non-conforming loans, because they don't meet certain criterias set by Freddi Mac, Fannie Mae, Ginnie Mae (such as high loan-to-income, loan-to-valio ratios, etc) compared to regular mortgages, which are mostly conforming. Because of being non-conforming, HELs usualy can't be securitized into MBS offered by GSEs, and usualy serve as colateral for CMOs.
jmcneal
@2007-05-11 02:30:48
Whether the loan is non conforming or can be securitized in what type of Asset Backed Security does not seem to be the initial question, just what is different between a normal mortgage and a Home Equity loan. Non- HEL's can be non- conforming as well as unable to be collateral in a GSE security.

The main difference is that a Home Equity Loan is based off of the borrowers' existing collateral and a "normal" mortgage (as pers seems to be asking about) is one obtained before the owner has any house "equity" to borrow against.

So i dont disagree with what a HEL can be but that is not the difference between that and a normal home mortgage since home mortgages can have the qualities of non-conforming high loan to value ratio (investment mortgage loan criteria) etc among many other things.

CFA Discussion Topic: Closed HELs

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