First, the
bank’s balance sheets see second-lien position loans as high risk and are
exponentially more likely to issue a freeze or pay in full call on the loan.
They have no guarantee of collateral rights (the home) and therefore they
cannot repossess a property, so a bank must remove this loan from their books
before all others!
Second, the access
to equity on a first lien HELOC allows up to 95% loan to value on the home’s
equity. That money is 100% liquid like a checking account and as we say, “It’s
better to have it and not need it than to need it and not have it!” In other
words, it’s a cushion or safety net in case one needs cash immediately for an
emergency.
Third, one has a more efficiency due to there being zero segregation of
income – these small transactions or money that sits outside the HELOC
operating account go to waste.
So, even if the
numbers are identical or it even saves some money to get a second position
HELOC – is it worth throwing away 2/3 of the free benefits listed above?