Home Equity Fixed Loan vs. Home Equity Line of Credit: What Are The Differences?
It’s not uncommon for homeowners to use their residence as collateral to obtain cash. Such funds are often needed for pricier endeavors, like paying for a renovation or college tuition. When these funds are needed, there are two possible avenues to take when using your home as collateral: a home equity loan or a home equity line of credit.
Both of these loans are based primarily on the borrower’s credit history and home equity, with other criteria impacting the decision. If you have equity in your residence, homeowners can borrow against their home at relatively low interest rates. These loans are also advantageous because, depending on how the funds are used, interest payments may be treated as tax-deductible. However, despite the similarities between a home equity loan and a home equity line of credit, the differences between them are significant. The road you take often depends on your financial situation and personal preferences. Get a glimpse into each loan type to see which is right for you.
Home Equity Fixed Loan
The term of a HE loan can be set up for one to 20 years, with interest rates varying case to case (based on such things as the borrower’s credit history, lien position of the property and term) but currently fall somewhere just north or south of 2.75%. For those who like to zoom out and see what their financial path is over a set period, a reliable HE might be the path to take.
Home Equity Line of Credit
With a HELOC, borrowers may know the maximum of their loan as it is the top of their approved credit limit. However, it can be harder to predict how much they will owe back as interest rates for these loans can swing with the economy.
Ask What You Need
In need of a loan but aren’t sure which is right for you? First Hope Bank works with clients on their specific needs to advise on the best loan options available. For further information, contact us at (908-459-4121) or visit us online to apply today.