What is the difference between a home equity line of credit and a home equity loan?

Usually, both of these are second mortgages, but which is better for you?

A home equity line of credit (known as a HELOC) is like a credit card secured by your home. It is typically a variable rate rate loan at a rate of the prime rate plus or minus a number.

The repayment is usually interest-only for the first 10 years, and then turns into a principal and interest payment amortized over the last 20 years; many HELOCS have an annual fee.

A home equity loan usually has a fixed rate and is amortized over a fixed period of time, such as 25 or 30 years, often times, the interest rate on the home equity loan is higher than the HELOC.

Comparing the two products, the payment on the HELOC is usually lower than the home equity loan, but it has a variable interest rate with an interest only payment in the early years, which could be riskier than the home equity loan.

Contact us and we can help you weigh your options!

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