Home Equity Loan And Home Equity Line Of Credit (HELOC)

If you are looking for an affordable, flexible way to borrow money, a home equity loan or line of credit may be a great way to get cash you can use for nearly any purpose. Using the equity you have built up in your home as collateral, you may be able to choose between two main types of loans. Read on to learn the differences between the two types of equity loans and the benefits and drawbacks of each.

Home Equity Loan Vs. HELOC

While both home equity loans and lines of credit allow you to borrow against the value of your property, there are a number of differences between the two. With a home equity loan you receive a single lump sum. You determine the amount you need, up to a certain percentage of your home's value. Like a fixed rate mortgage, a home equity loan features an interest rate that's fixed for the life of the loan, and is repaid in equal monthly installments. As this loan is secured (your home is used as collateral) you generally pay lower interest rates than you would on other types of credit such as personal loans.

A HELOC is similar to a credit card in that you have access to revolving credit. You can borrow money as you need it, up to a certain fixed limit during the draw period. The amount that you borrow is subtracted from the fixed credit limit, and the remainder is still available to borrow. Once the sum used is repaid, you can borrow it again. With a HELOC, you have access to cash as you need it. HELOCs also feature adjustable interest rates and flexible payment plans, much like credit cards. However, the number of years available to access the credit line is limited; afterwards, the loan's principal and interest must be repaid in monthly installments.

With both types of home equity borrowing, the interest rates are low, and the loans may be relatively easy to obtain. The interest payments on both types of equity loans are usually tax deductible, making them among the most affordable ways to borrow. Ask your tax advisor about the potential tax benefits available to you.

Can I Get A Home Equity Loan Without Perfect Credit?

At Countrywide Bank’s Full Spectrum Lending Division we specialize in providing home equity financing solutions for homeowners throughout the United States. Our long history and industry leadership have enabled us to become a trusted mortgage lender with millions of customers served. Find out how much equity you may be able to tap into. Call 1-800-909-8217 to speak to one of our Home Loan Consultants for a no cost, no obligation loan consultation.