How Can a Florida Home Equity Loan be Unsecured?

Is it possible for a Florida home equity loan to be considered “unsecured?” This would seem unlikely, based on the home itself essentially securing such a loan, but your credit history may occasionally list it as such.

Does this matter? Is it good idea - or a possibility - to request a change of type to make this into a second mortgage? Don Taylor, a certified financial analyst, responded to these questions …

If the home equity loan, combined with any outstanding mortgage loan balance, is for an amount more than the property is worth, then a portion of the loan is unsecured. Because you may have used the proceeds from the home equity loan to pay off your Florida mortgage, it’s possible that is the reason that the loan was originally listed in your credit report as unsecured.

You should have a good enough handle on what your home was worth when you took out the home equity loan to know whether or not that was the case.

Can you just make this int a second mortgage? No. A second mortgage is called that because it is second in line to the first mortgage if the property goes into foreclosure. If you no longer have a first mortgage, then the home equity loan is first in line and technically it isn’t a second mortgage.

Taylor recommends taking the time to get this corrected on your credit report. Try talking to the lender first, rather than going through the dispute process under the Fair Credit Reporting Act, or FCRA. If you can’t come to terms with your lender, then you can dispute the account.

Why is this suggested? Becayse the mix of credit on your credit report is one of five components in your credit score. Granted, the type of credit used is only 10 percent of your credit score, but the credit score looks at the ratio of credit used versus credit available and having the home equity loan listed as unsecured credit might unfavorably impact that ratio.

This would then affect any future Florida home loans you applied for.