What to Look For on Any Second Mortgage Loan
Look carefully at the credit agreement and examine the terms and conditions of various plans including the annual percentage rate (APR), the costs you'll pay to secure the loan, and prepayment penalties. The disclosed APR will not reflect the closing costs and other fees and charges, so you will need to compare these costs among lenders, as well as the APRs.
You cannot compare APRs of home equity lines to the traditional second mortgages since the APRs are figured differently. The APR for a traditional mortgage takes into account the interest rate charged plus points and other finance charges. The APR for a home equity line is based on the periodic interest rate alone. It does not include points or other charges. You can compare the closed-end "note" rate with the line of credit APR and their other charges.
