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What is the difference between a 'home equity loan' and 'line of credit'? |
What is the difference between a 'home equity loan' and 'line of credit'? A home equity loan uses the equity in your home as collateral while a line of credit can be simply a promise to pay without collateral. HE Loan you pay back and your through. Borrow enough to get what you need done. A HELOC is a line of credit, when you pay it back, just like a credit card, you still have funds available to you. So, basically a regular loan is a one time thing, and a line is ongoing. home equity loan has regular payments you have to make on it. once it is paid off it is done.where as line of credit all you have to do is make regular interst payments on it. as to what you owe up to your credit limit is up to u. it just has to be paid off when you sell your house very little--- equity loans can either be revolving or closed end second deeds of trust. Lines of credit if made with a deed as the instrument is the same thing as a revolving second or a HELOC. In opting for these you need to know if revolving ti the index it revolves. Prime rate, cost of funds index, U.S. Treasuries etc. In a climbing market of rates, I would go for the closed end fixed rated second deed of trust. That way you do not have any interest only payments and the loan is fully amortized over the term. I am a loan officer A line of credit is where you have a certain amount of money that is available to you to use in whatever way that you desire, and you pay an interest rate, as well, as much money that you can pay from the money that you have borrowed. Usually it is a low interest that you pay. A home equity loan is a loan based upon the mortgage interest rate that you are charged. Usually it is used when you are combining all of your debts and your mortgage under one payment. Why this is used is because this kind of a loan is lower than the standard Condensed Debt Loan. Both are useful tools; it all depends on what your particular situation is. |
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