The loan itself
First position vs second position
The practical difference
With a second-lien line you have two obligations. The mortgage keeps its schedule and its fixed rate, and the line sits alongside it. Most people draw on it for something specific and pay it back down.
With a first-lien line you have one obligation, and it is the account your income and expenses run through. That is a much larger change to how your money works.
What they share
Both are open-end lines secured by your home. Both carry variable rates. Both can be frozen or have the credit limit reduced by the lender under the circumstances federal rules permit.
Lien position is not a shield. The rules on suspending or reducing a line say nothing about which position the line is in.
| Second position | First position | |
|---|---|---|
| Relationship to the mortgage | Sits behind it; the mortgage stays | Pays it off and replaces it |
| Typical size | Limited to remaining equity | Sized against the property, subject to CLTV limits |
| Typical use | A specific project or expense | The only loan, used as the everyday account |
| Payments | Line payment plus the mortgage payment | One line, no separate mortgage payment |
| Rate | Variable | Variable |
| Secured by your home | Yes | Yes |
| Can be frozen or reduced | Yes | Yes — the same federal rules apply |
Common questions
Which is riskier?
Can I convert a second-position HELOC to first position?
Sources
- Consumer Financial Protection Bureau — Regulation Z §1026.40, requirements for home equity plans
- Federal Reserve Board — What you should know about home equity lines of credit
Primary sources for the rules and figures on this page. Product terms are set by the lender and by your loan agreement, not by these documents.