A home equity loan, or second mortgage loan, can cover many financial needs such as consolidating debt, home improvement, college tuition, or big ticket items like cars. However, Kansas City home equity loans differ from first mortgages, most noticeably in their mortgage rates.

Home Equity Loans Have Higher Rates

Kansas City mortgage rates are often determined by the level of risk. If you have a first mortgage and a home equity loan and foreclose on your loans, you can only pay your home equity loan after you pay your first mortgage. This lack of priority puts the home equity loan lender at higher risk, causing Kansas City mortgage rates to be higher for home equity loans than for first mortgages.

Home Equity Loans Have Fixed Rates

There are two basic types of Kansas City mortgage rates when you use your home equity: fixed and variable. Home equity loans have fixed rates, meaning they cannot be changed for the entire life of the loan. Fixed rates are typically a better choice in today’s fluctuating mortgage market because they are less risky than variable rates, especially for one-time projects like a home improvement.

Home Equity Lines of Credit May Have Variable Rates

Home equity lines of credit (HELOCs) have variable rates. Variable mortgage rates in Kansas City are not like fixed rates because they change unpredictably. There is no guarantee that the interest rate will not change in an instant, so do not take your time paying this line of credit back. Variable Kansas City mortgage rates are more likely to increase over time than decrease.

However, HELCOs sometimes allow interest-only payments for a set amount of time. Therefore, if you would like to begin with smaller payments and are not worried about paying more later on, HELOCs may be the right option for you.

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The above information is for educational purposes only. All information, loan programs and interest rates are subject to change without notice. All loans subject to underwriter approval. Terms and conditions apply. Always consult an accountant or tax advisor for full eligibility requirements on tax deduction.