Equity Loan vs. Home Equity Line of Credit

Equity is the difference between the “value” of the home and the “balance” of the existing mortgage on the property.

A home equity loan (term loan) is one large sum that is paid off over a period of time.  Rates and payments remain constant (fixed rate), and once the loan is closed you can no longer borrow from that loan.  A home equity loan typically has a lower rate than a HELOC and is used for debt consolidation and other single-purpose purchases.  125% home equity loans allow you to take out a loan for a value greater than that of your home.

A home equity line of credit works like a credit card.  A borrower can only borrow up to a certain amount over the life of the loan.  Just like a credit card when you pay off the principal your credit revolves and you can use it again.  Monthly payments will vary depending on the current balance and interest rate (non-fixed - variable interest).  When the loan reaches maturity, everything must be paid off.  An initial advance is often required when the loan is set up, and a minimum amount each time you withdraw.

To choose what loan is best for you, contact one of our Loan Officers today.