|Author||Topic: Closed HELs|
|Anyone knows the difference between the Home Equity Loans and the normal residential mortgage ? they both sound the same thanks|
|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 .
|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|
|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.|
|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.