Q: I recently took out a home equity line of credit (HELOC) with a national mortgage bank. I was approved for a $25,000 line of credit but only have a balance of $3,750.

Now the HELOC is listed as a “2nd mortgage” on my home according to my home owners insurance. That scares me as I only owe $55,000 on my house.

Does the HELOC really have to be listed as “2nd mortgage” on my account?

A: Yes. A home equity line of credit (HELOC) is a loan that uses the property as collateral. The lender correctly took out a lien against the property, and is listed as the second mortgage holder, meaning that if you default against both of your loans, the primary mortgage lender gets first dibs on any equity. Once the primary mortgage lender is paid off, the second mortgage lender gets to dip into the equity generated by a sale to get paid.

I’m sure your loan specifies this. Please read your loan documents and be sure you understand them.