While both a home equity
loan and a home equity line of credit allow you to borrow money based on the
difference in the outstanding balance of your mortgage and the value of
your home, there are differences between them that you have to look at
before you make your decision.
A home equity loan carries low interest and regular monthly payments. When you want to use the equity that you have built up in your home to get a loan, you can choose a home equity loan. Depending on your credit record and the lender that  you choose, you
may be able to borrow up to as much as 125% of the amount of equity. There
are no restrictions on how you use this money. You receive a lump sum
payment once all the paperwork is finished.
The thing that you have
to look at with a home equity loan is that it is a one-time deal. You
can choose a fixed rate of interest or a variable rate, and you have
a term in which you have to repay the loan. Once you pay off the loan,
you cannot go back to the lender and apply for a second home equity
loan.
A home equity line of credit gives you access to a source of funding
that you can use and reuse as you please. The lender agrees to approve
an amount of money and you use it like a checking account from which
you can draw funds. You can take out all of the money at once, or only
part of it. The payment you make each month is a percentage of the outstanding
balance and the interest is computed based on the amount
of the balance. With this line of credit, you only make payments if and when you draw money from your account.
If you would like to talk to a Home Loan Expert and learn more about home equity lines of credit, refinancing, applying
for a mortgage or a home equity line of credit, simply fill out the form
below for a free, no-obligation consultation.
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