Home Equity Line or Home Equity Loan?

I have always thought that a home equity line is the same as a home equity loan. I was wrong. There are similarities between these two, as well as differences.

A home equity line of credit is also called HELOC or a line. A Home equity loan is called HEL or a loan. They are both designed to enable the home owners to borrow against the value of their homes.

HELOC is like a personal credit card. You can borrow as much as you want at anytime, up to a predetermined credit limit. You are required to make monthly minimum payments. You have the flexibility to pay off your balance anytime you want. HEL is a loan. You get the lump sum up front, up to the limit that is predetermined. Afterwards, a fixed monthly payment is required until the balance is completely paid off.

Generally speaking, the HELOC and HEL have a much lower interest rate compared to your credit cards or other loans. It is also relatively safe since it is secured by your property. The interest you pay on those is also tax deductible.

HELOC usually doesn’t have any closing cost. Its interest rate usually starts out lower than HEL, but it fluctuates with the prime rate. It is also relatively riskier. However, it does give you the option to take money out whenever you need. Vice versa, HEL has a closing cost. It offers you fixed interest rate, as well as the adjustable rate.

It depends on your own situation and flexibility. HELOC and HEL should be considered depending on the individuals. If would you like to find more information on the subject, you can visit the following websites.

http://realestate.yahoo.com/loans/guides/your_equity_options.html;_ylt=Ai5JitHP29yMV4UajsiRltyavYl4

http://realestate.yahoo.com/Georgia/Marietta/loans;_ylt=Auq6sNrnw4NLi.r22EZboZqTvYl4