There are several types of home equity loans. Two of the more popular loans are the home equity line of credit (HELOC) and the home equity loan. These two loans come with different terms and agreements. You should choose a home equity loan based on your goals and objectives. Make sure the terms are compatible with your needs.
If you decide upon a home equity line of credit, you will be approved for a certain credit limit that should not be exceeded. You can access the funds as you need them with a check. The interest rate is usually variable and the minimum payments are interest only.
A home equity loan will have a fixed rate and the entire amount is advanced up front.
Both loans are secured by the equity in a home. The interest is usually tax deductible for both types of loans. These loans are the same as a second mortgage.
When the interest rate for a HELOC increases, the payments can increase. The terms can range from five years to 25 years.
These types of loans can be used for a variety of purposes, including home improvements, tuition, debt consolidation or medical bills.
There are costs involved. HELOCs have closing costs, while home equity loans have no closing costs.