Home Equity Loan or Line of Credit?
Now is the time to use the equity in your home.

During a time of rising home loan interest rates, it makes since to use the equity in your home to update your living space, rather than sell and move to a new home. Home equity is the difference between what you owe on your home and its current market value. It is one of the biggest perks of home ownership. You can use your equity to secure low-cost funds to help you with home improvements, debt-consolidation, travel expenses, or any number of high-cost life events. First, it’s important to know the difference between a home equity loan and a home equity line-of-credit (HELOC).

Home Equity Loans are distributed as a lump sum of cash. This is a good option if you need a large amount of cash for a one-time need, such as a wedding or home renovation. These loans typically have fixed rates and precise monthly payments. 

A Home Equity Line of Credit (HELOC) is a line of credit (like a credit card) established by determining the equity in your home. Different from a Home Equity Loan, HELOCs have more flexibility with when and how much money you take from the account, and how you make the payments. HELOC accounts are commonly funded with 80% of the value in your equity. Once a HELOC account is opened, you can draw funds at your discretion. They are commonly used for ongoing home repairs or upgrades, bill consolidation, school expenses, vacations, etc. Payments are made on the remaining balance and repayment periods can last from 10 to 20 years.

Both a home equity loan and a line of credit will require you to meet certain eligibility criteria, similar to applying for a mortgage. Some institutions may waive certain fees, but be prepared to pay the cost of inspection, loan processing, loan origination, appraisal and recording fees. Also, as with other loan products, the higher your credit score, the better interest rate and terms you qualify for.

For more information on Home Equity loans or HELOCs, contact our mortgage department to determine your eligibility and which loan is best for you. Call us at 833-759-1941 or come into a branch near you.