What is the Difference Between a 1st lien HELOC vs. a 2nd Lien HELOC?

Liens are recorded on your title. Whichever is recorded first (by date) is in first position. Most people have a mortgage in first position. In the event of a foreclosure, whatever lien is in first position gets paid from the proceeds of the sale. If there’s any money left over, that will go to the lien in second position. If there’s no money left over, the lienholder in second position is out of luck, which is why 2nd lien position loans tend to have higher interest rates, as they are deemed riskier in the eyes of the bank.

In the context of our strategy, getting a 1st lien HELOC would mean that you’re replacing an existing mortgage into a HELOC. A 2nd lien HELOC implies that you’re going to keep the existing mortgage while simply adding another debt on top of it.

The difference with a HELOC is that a PLOC is not using your equity as a collateral. A PLOC can also be used for the benefit of the strategy.