What type of account is typically secured by real estate and is subordinate to the first mortgage?

A Home Equity Line of Credit (HELOC) is typically secured by real estate and is subordinate to the first mortgage. This means that a HELOC allows homeowners to borrow against the equity they have built up in their property. The equity is the difference between the property's current market value and the outstanding balance of the first mortgage.

In terms of priority, the first mortgage (or primary mortgage) remains the first lien on the property. If the borrower defaults and the property needs to be sold to repay debts, the first mortgage lender gets paid first before any funds are allocated to the holder of the HELOC. This subordinate position of the HELOC creates a higher risk for the lender, which is why the interest rates for HELOCs can vary and are often higher than those for a primary mortgage but typically lower than other forms of unsecured loans.

Home equity loans are also secured by real estate, but they usually represent a one-time lump sum borrowing rather than a line of credit. A cash-out refinance is a process that involves refinancing an existing mortgage for more than what is owed and taking the difference in cash, meaning this option is not subordinate in the same way. A reverse mortgage allows seniors to access home equity without monthly payments, but this type of loan