HELOC for paid off house VS Get Mortgage for second home

[Bob Mane]

I am looking to buy a second home that will be used to help out some family members. As long as I gain equity long term in the property I am fine with that. I have checked out various sites and know the basic differences between HELOC & Mortgage. I have 100% equity in current home. Many banks (bankers) are flaky and it is tedious contrasting the various fees and data points. Anyone have feedback as to which might be a better route?

[Shera Gregory]

When you say "mortgage" you mean taking out a standard mortgage on your primary residence, right? Not on the second home? In my experience the 30 year fixed will give you the lowest rate and, I think more importantly, you have the security of a fixed product that they won't pull back. The HELOCs are renewed periodically so if something severe happens in the economy or even just with that particular lending institution they could change their rules that would make it harder or not possible to renew. On your primary residence that's not terribly likely but it is something to include in your comparison. If for some reason you were considering getting a mortgage on the second home you should take into account how far away is that from your primary residence. In order to get the best interest rate and not be considered an investment property some banks will require that the second home be some minimum distance from your primary residence.