Flexible second mortgage products are in demand! There are many HELOC and HELOAN options out there for borrowers who qualify. But what about those borrowers who miss the requirements, such as a self-employed borrower, who needs to tap into their equity to achieve their goals? A non-QM HELOC or non-QM closed end second mortgage is the answer and Deephaven Mortgage has both!
What is a closed end second mortgage or a HELOAN?
A HELOAN, also known as a closed end second mortgage, is a loan that offers a fixed monthly payment on a long-term basis. Once a borrower qualifies for this loan type, they will receive the loan amount as a single lump sum and will begin to make payments on the entire loan amount they borrowed.
Similar to other loan products they have a fixed interest rate, and the monthly mortgage payments will remain the same throughout the life of the loan. Many borrowers may prefer the stability of a fixed interest rate that won’t change with market conditions.
Why is Deephaven’s HELOAN different from others?
Deephaven Mortgage offers a non-QM standalone closed end second mortgage for borrowers who need more flexibility to qualify. Our Equity Advantage Closed End Second and our Equity Advantage Elite products are two standalone mortgage options specifically for non-QM borrowers. Our product is unique in that it is ideal for self-employed borrowers who can’t qualify using tax returns. A borrower can qualify using one of several income options, including the use of a traditional full doc application, the use of our 1-year profit and loss statement feature or by using personal or business bank statements. Not all lenders offer a bank statement closed end second product. This is why it is crucial for originators to offer a non-QM option to fully serve all borrowers.
What Is a HELOC Loan?
A home equity line of credit, or HELOC, allows borrowers to tap into their home equity to pay for expenses. A HELOC provides a line of credit based on the value of a home’s equity. Many borrowers like the flexibility of borrowing certain amounts over a period of time during the draw period and only paying back what they take out. It is similar to a credit card with a pre-approved limit – the exception being that the loan is secured against the equity in their home.
The amount a borrower can gain access to will depend on the value of their home, how much equity they have, credit and payment terms. Another difference from a HELOAN is that interest rates for HELOCs can be variable and can fluctuate with the market. Deephaven’s HELOC offers fixed rate terms up to 30 years.
Why is Deephaven’s HELOC different from others?
Deephaven Mortgage offers an alternative HELOC product that provides a flexible second mortgage solution. We have a bank statement HELOC option for self-employed borrowers to submit personal bank statements in lieu of tax returns. This product also allows full documentation and assets for income verification. It is available on first and second liens for owner-occupied homes, second homes and investment properties.
What is the main difference between a HELOC and a HELOAN?
When comparing the two equity solutions, one difference is how the funds are allocated. A closed end second HELOAN allows funds to be dispersed all at once, requiring repayment over a specific time. A HELOC offers a line of credit up to a determined limit and the borrower can draw any amount up to the maximum they are allowed.
Another big difference can be interest rates. The federal funds rate can affect HELOCs for borrowers with a variable rate. HELOANs are closed end seconds with fixed rates, therefore, the interest rate will remain the same. As mentioned, Deephaven Mortgage offers fixed rates for our HELOC product.
Is one better than the other?
No, both loan products offer borrowers versatility, and each are two popular options to draw on equity. They are simply different home equity loan types for borrowers who need to tap into their equity. One may be more suitable than the other depending on the unique circumstances of the borrower. The best way to know is to send your scenarios to Deephaven for review.
What is the opportunity in the market?
Due to affordability issues and interest rates, many borrowers aren’t moving. Instead, they are staying in their homes and tapping into their equity to make improvements. Other uses to obtain cash could be to start or fund a business, tuition, or debt consolidation. Regardless of the use, tapping into home equity to obtain cash can be a good way to achieve goals.
Consider these impressive statistics:
- New home equity loans increased by 40% year over year in 2024 – Bankrate
- There were more than 330,000 new equity loans in the first two quarters of 2024 – Bankrate
- The average homeowner with a mortgage has approximately $311,000 in equity built in their home – CoreLogic
Ready to check out Deephaven’s equity solutions?
Learn more about our Equity Advantage Closed End Second: https://deephavenmortgage.com/equity-advantage-closed-end-second/
Learn more about our Equity Advantage HELOC: https://deephavenmortgage.com/equity-advantage-heloc/
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