what are the key similarities and then key differences between a home equity loan and a home equity line of cr
Tags:home equity loans,
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i need to have a preference in between a 2 sorts of accessible home equity loans…
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First you have to ask yourself what you need the money for. If you need it to do an one time major home improvement, then pay it back slowly over the years, get a home equity loan. If you just want to have a credit line (like a credit card) to use the money from time to time, get a home equity line.
Home equity loan’s interest rate is usually fixed for the life of the loan, while home equity line’s interest rate fluctuates according to the market interest rates.
Talk to the bank’s loan officer. They will walk you through it.
The home equity loan is a set amount of money which you receive all at once. The home equity line of credit a loan that you only pay interest on the money that you draw. The line of credit is much safer.
a home -line of credit is an open ended loan… meaning as you pay it down it becomes aviable to you to use again
a equity loan is closed ended.. when you pay it down it goes away
I am a loan officer,,, does that make sense?
I will make this as simple as possible, I dont know your loan but this is how most work.
Home equity loan you get 20,000. You pay monthly payments on that 20,000. Home equity line of credit, you have credit for up to 20,000. Like a credit card.
Say you take the first option when you owe 10,000 you cant just get another 10,000, its a loan. Now if you have option number 2 and you owe 10,000 and decide I want more money for whatever reason you have 10,000 left.
One is a mortgage like any other mortgage, one is a credit card backed by your home. Many states will require you to have a license to do the first option, when they wont for the second. Its either a mortgage debt or consumer debt.
Equity line of credit is a credit card that you secure with your house.
A loan is simply money they give you and you pay it back like a mortgage (in fact it is a mortgage). A line is money that you have available and you can take it out as needed and pay it back as needed (and you need to make payments on it monthly, also).
Essentially an equity loan is just another mortgage on the property. An equity line is also another mortgage on the property but its seems more like a credit card with a really high limit. It is secured by the property but it otherwise can be used like a credit card.