Home equity loans and credit lines rarely have the amount of closing costs that first mortgage loans normally entail. In fact, most lenders waive their usual closing costs for current borrowers.
However, second mortgages do have higher risk exposure than first mortgage—so they have higher rates. Remember that if the property is ever foreclosed and sold, the sale proceeds must first completely pay off the real estate tax, closing costs and first mortgage liens. The second mortgage is paid from any proceeds remaining after practically everyone else is paid.
The interest rate will normally vary depending on how much of the property's equity is being used by the home equity loan. The less equity remaining after the second mortgage is recorded, the higher the interest rate.
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