Planning a Home Improvement Project?
Know the Difference
Home Equity Loan Vs. a Home Equity Line of Credit (HELOC)
Have you been waiting for the right time to do some home improvement work? Well, wait no more – rates are low and staycations are the plan for most.
Home Equity Loans and Home Equity Lines of Credit (HELOC) are both good options if you need to finance your projects; each with different benefits. Here’s an overview of both so you can pick the one that’s right for you:
Home Equity Loans
A Home Equity Loan offers a fixed amount of money with your home as the collateral. You will be making the same payment each month for the life of the loan because payments are based on a fixed interest rate. The amount that you can borrow varies based on the value of your home and current mortgage, the financial institution and state regulations.
Home Equity Line of Credit (HELOC)
A Home Equity Line of Credit (HELOC) establishes a line of credit to draw from, allowing you to withdraw cash as many times as you need during the draw period. The amount you will be repaying varies since the repayments are set according to adjustable interest rates and the balance on the loan.
Like Home Equity Loans, your home is considered collateral for the HELOC. The conditions offered with HELOCs differ between lenders including the amount you can borrow, the length of time you have to borrow against the line (the draw period) and how long you have to repay.
3 things to consider:
Home equity loans offer a fixed amount that can be received only once, but a HELOC offers multiple withdrawals up to a certain balance and draw period.
The interest rate remains fixed in case of the home equity loan, but it is adjustable for HELOC.
With home equity loans, repayments are fixed amounts to be paid monthly. A HELOC has fluctuating monthly payments based on the amount borrowed at variable rates.
So, which one?
A Home Equity Loan is best if you prefer fixed monthly payments and you know exactly how much you need to borrow. A HELOC is a better option if your costs will be spread out over time or you want flexible access to your home’s equity that you can pay off quickly. Every person has a unique financial outlook and goals –our experts understand that. We would be happy to answer any questions you have and help you find the right financing for your needs.