Home » Finance » Loans

A Home Equity Loan Or A Home Equity Line Of Credit?

Aug 17, 2007
When you need the cash out of the equity in your home, you may find that there are a few choices that are before you. Should you go with a home equity loan, or would a home equity line of credit (HELOC) be better? Here are some features of both to help you decide which one may be better for you.

If you are certain that you would like the cash out of your equity in one lump sum, then a home equity loan would be the better option for you. This means that if you know that you want the equity right away and have a purpose (or more than one) that you need the money for, then this would be the way to go. The cash from a home equity loan, or a home equity line of credit can be used in any way you want. If you want to pay for a family member's college education, or get a boat, fix up your home or make an addition, or travel, then this could be your ticket.

A home equity loan is a second mortgage, and you will often be given up to 15 years to repay the loan - or more. It is usually in the form of an adjustable rate mortgage, but you can also find lenders who will give you fixed rate, too.

A home equity line of credit, though, will give you a few options that a home equity loan will not - if you do not need the cash all at once - or are not sure if you need it all. A HELOC is also a second mortgage, but instead of getting all the cash up front, you are given a line of credit and a credit limit. A credit card, or a checking account gives you the access to the funds - as you need them.

Generally, you must make a minimum draw right away and then you start paying the interest on a monthly basis of the amount you have withdrawn. This is a major difference right here. You only pay interest on the portion of the money that you have actually withdrawn. So if you do not use it all, then your monthly payments and interest are lower. The interest is often calculated daily, and so each month will see a different size payment. You are also given a limited time to withdraw the funds - often around 11 years.

A HELOC is usually calculated on a 25 or 30-year term, and this is broken down into two periods - the draw period and the amortization period. During the draw period, you use the funds as you see fit. But at the end of the draw period, the time for amortization begins. You cannot draw out any more money, but your payments are recalculated and you begin paying off the loan.

There are several ways that you might do this, though, and you need to know which one will apply to your mortgage before you sign. It is possible that there could be a balloon payment at the end of the draw period. This would require that you refinance. Other terms may simply be monthly payments for the balance of the full-term, or other arrangements may be possible, too.

Only you can know which one, either a home equity loan, or a home equity line of credit, will be better for your needs. Whichever way you decide to go, though, be sure to get several quotes and then compare them carefully to know which one is the best deal. There may be quite a bit of difference in the interest rates and other terms - some are good and some just plain are not good.
About the Author
Joe Kenny writes for Rebuild.org, offering home equity loans, or read the article on whether a HELOC right for you
Visit today: Loans from Rebuild.org
Rating:
Please Rate:
(Average: Not rated)
Views: 116
Print Email Report Share
Article Categories
    • Artists
    • Gambling
    • Humanities
    • Humor
    • Movies
    • Music
    • Photography
    • Tattoos
    • Television
    • Classic Cars
    • Motorcycles
    • Recreational Vehicles
    • SUVs
    • Trucks
    • Vans
    • Branding
    • Business Opportunities
    • Careers and Jobs
    • Corporate
    • Customer Service
    • Direct Mail
    • Entrepreneurship
    • Ethics
    • Financing
    • Franchising
    • Home-Based Business
    • Human Resources
    • Import and Export
    • Leadership
    • Management
    • Market Research
    • Marketing and Advertising
    • Negotiation
    • Network Marketing
    • Networking
    • Organizational
    • Presentation
    • Project Management
    • Public Relations
    • Small Business
    • Strategic Planning
    • Team Building
    • Telemarketing
    • Training
    • Data Recovery
    • Databases
    • Games
    • Hardware
    • Networks
    • Operating Systems
    • Programming
    • Security
    • Software
    • Spyware and Viruses
    • Ask an Expert
    • College and University
    • Home Schooling
    • K-12
    • Languages
    • Online Education
    • Psychology
    • Coffee
    • Cooking
    • Gourmet
    • Recipes
    • Wine and Spirits
    • Acne
    • Aerobics
    • Alternative Medicine
    • Beauty
    • Cancer
    • Cosmetics
    • Depression
    • Diabetes
    • Diseases and Conditions
    • Fitness Equipment
    • Fitness
    • Hair Loss
    • Heart Disease
    • Medicine
    • Men's Health
    • Muscle Building
    • Nutrition
    • Skin Care
    • Supplements and Vitamins
    • Weight Loss
    • Women's Health
    • Yoga
    • Arts and Crafts
    • Babies
    • Collecting
    • Elderly Care
    • Genealogy
    • Hobbies
    • Parenting
    • Pets
    • Pregnancy
    • Woodworking
    • Feng Shui
    • Gardening
    • Home Appliances
    • Home Security
    • Interior Design
    • Landscaping
    • Affiliate Programs
    • Article Marketing
    • Auctions
    • Audio
    • Banner Advertising
    • Blogging
    • Broadband
    • Domain Names
    • E-Books
    • E-Commerce
    • Email Marketing
    • Ezines and Newsletters
    • Forums
    • Internet Marketing
    • Link Popularity
    • Pay-Per-Click
    • Podcasting
    • RSS
    • Search Engine Marketing
    • Search Engine Optimization
    • Security
    • Social Media
    • Spam
    • Video
    • Viral Marketing
    • Web Design
    • Web Development
    • Web Hosting
    • Copyright
    • Cyber Law
    • Intellectual Property
    • National, State, Local
    • Patents
    • Regulatory Compliance
    • Trademarks
    • Buying
    • Selling
    • Baseball
    • Basketball
    • Boating
    • Cycling
    • Extreme Sports
    • Fishing
    • Football
    • Golf
    • Hockey
    • Hunting
    • Martial Arts
    • Running
    • Scuba Diving
    • Soccer
    • Swimming
    • Tennis
    • Dating
    • Divorce
    • Marriage
    • Weddings
    • Astrology
    • Buddhism
    • Christianity
    • Faith
    • Hinduism
    • Islam
    • Judaism
    • Meditation
    • Metaphysical
    • New Age
    • Cable and Satellite TV
    • Cell Phones
    • Communication
    • Gadgets and Gizmos
    • GPS
    • Satellite Radio
    • Video Conferencing
    • VoIP
    • Addictions
    • Coaching
    • Goal Setting
    • Motivational
    • Stress Management
    • Time Management
    • Clothing
    • Electronics
    • Fashion
    • Gifts
    • Jewelry
    • Causes and Organizations
    • Environment
    • History
    • Holidays
    • Men's Issues
    • Nature
    • Philosophy
    • Politics
    • Women's Issues
    • World Affairs
    • Air Travel
    • Camping
    • Cruises
    • Destinations
    • Outdoors
    • Article Writing
    • Book Reviews
    • Copywriting
    • Fiction
    • Non-Fiction
    • Poetry
    • Quotes
    • Screenplay
    • Tools and Resources