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What's the difference between home equity loan and a home equity line of credit? which is better? why? |
What's the difference between home equity loan and a home equity line of credit? which is better? why? The first person to answer this question did a great job of explaining the differences between the two loans. Something important to consider: Rates on most home equity lines of credit or HELOCs are adjustable. That was great a few years ago when rates were at record lows. Now that rates are slowly starting to creep up, I don't recommend a HELOC. Other options are a fixed rate home equity loan or refinancing your first mortgage with cash out. If you don't need all of the cash right away, you can put it in a CD, savings account or money market account. You will have easy access to the funds (though a little more limited with a CD) and maybe even earn a little interest on the money. Not as much interest as you are paying to borrow it, but every bit helps. Contact your local bank or mortgage broker to look into your options. Source(s): I used to do home equity loans at a local bank and now work as a mortgage loan originator for a mortgage broker. http://ohiomortgages.blogspot.com... http://www.1stequitymtg.com In a home equity loan you get all of the money you qualify for at once. A home equity line of credit is sort of like a checking account and you take the money as you need it. Which is better depends upon your situation, do you need the money all at once or are you planning some projects that you need the money over time. In a loan the interest starts immediately on the total amount, on the line of credit you only pay interest on the amount that you have borrowed thus far. I did the line of credit once and got into big trouble with it. They gave me like 25,000 to do whatever I wanted with. I could pay it off and run it back up. If your super responsible this is a great way to have a constant open amount to get cash to make home improvements, pay for childrens college or whatever. Unfortunately I used it not for what it was meant and it ran up in a hurry and was hard to pay back. It is like a charge card. Where as the home equity loan is a one time payment. a HELOC is a seperate loan, with a seperate payment, secured by your crib. If you lost your house, the mortgage company gets paid first, and the heloc second. The home equity laon is where you refi, and take out the equity. The heloc has lower fees, but is a seperate loan you must pay in addition to your mortgage. The refi would be only one payment a month, but has bigger fees....which is better for your situation? |
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