Deciding Between a Home Equity Loan and Home Equity Line of Credit
Home equity loans and lines of credit are powerful tools that give homeowners simplified access to cash to use however they wish. Although alot alike, there are several key items that differentiate these home equity products. Make sure you clearly understand both products before tapping into your home\’s equity for home improvement, purchase of a new car, etc..
Housing prices are always bouncing around. At any point in time, the difference between a home\’s market value and any outstanding mortgage balance equals the equity. For example, if your home\’s value is $380,000, and you have outstanding mortgage loans of $180,000, then your home equity equals $200,000. With either loan type, the homebuyer may choose to access all, or part of the home\’s equity.
Benefits of a Home Equity Loan
Home equity loans are comparable to other forms of personal loans. While, personal loans are secured with a vehicle title or some other piece of property as collateral, with a home equity loan or line of credit, your house is the collateral.
Most home equity loans offer competitive fixed rates and payments that are amortized over 15 years. At closing, the homeowner receives the funds in a lump sum which can then be used towards any purpose. As with most loans, the homeowner may choose to pay the loan off faster than scheduled.
Why Should I Choose a Home Equity Line of Credit?
As with home equity loans, home equity lines of credit are also based on the home\’s underlying equity. But, instead of funds being received in a lump sum, lines of credit are essentially revolving credit accounts. If approved for a $50,000 home equity line of credit, a revolving credit account is established for this amount, and homeowners may withdraw funds up to this limit as necessary.
Lines of credit are similar to credit card cash advances. However, the rates are much more favorable. Once money is withdrawn, payoff must be completed with 10 years normally. Since line of credit rates are variable (using some factor of either the prime rate or LIBOR), payment amounts can and do change.
If you\’re shopping for a home equity loans or home equity line of credit Easy-Home-Equity-Loans.com can assist. Check out our website for today\’s offerings, assistful commentary and tips on securing the best home equity product for your needs.
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