You see them all the time, advertisements for a low rate HELOC or perhaps even a home equity loan. These types of financing are offered to people who have at least some equity in their own home. They can be a useful lifeline for someone who is seeking to utilize some of the hard-earned money that they have invested in their home. The question is, what is the difference between a HELOC and a home equity loan? We want to explore each of these options to best help you determine which one might be right for you.

Understanding a Home Equity Line of Credit (HELOC)

A HELOC is a form of financing that allows you to borrow against the equity that you have built up in your home. The interesting thing about a HELOC is that it is not quite the same as a home equity loan. This is because it is possible for the borrower of a HELOC to borrow against the equity in their home more than once.

Essentially, a HELOC acts in much the same way as a traditional credit card does. The borrower can continue to borrow against the equity of their home more than once as long as they have some new equity to borrow against. That is helpful for those who believe that they may need to continue to borrow against their home multiple times to take care of the various financial priorities that they might have.

Advantages of a HELOC include the following:

• Flexible access to funds as needed
• Interest is only charged on the amount you use
• Ideal for ongoing or variable expenses
• Can be reused as you repay, within the draw period

Understanding a Home Equity Loan

This type of loan is a more traditional form of loan borrowing. You borrow money against the equity in your home, but you only do so once. You have a set interest rate, and you know how much your payments will be each month. You only borrow a home equity loan once, but you might be able to borrow a somewhat larger sum with a home equity loan compared to a HELOC.

Advantages of a home equity loan include the following:

• Borrow the amount that you truly need
• Enjoy a fixed interest rate for the life of the loan
• Have a fixed payment that you make each month

Contact Canyon View Credit Union to Learn More About HELOCs and Home Equity Loans

Which Type of Loan is Right for You?

The big question often asked by homeowners is, “which type of loan is right for me?” Should you spring for the HELOC or enjoy a home equity loan? That is going to largely depend on the specific reasons why you are borrowing the money.

Are you seeking to use your equity for a specific one-time need? Or, do you feel that having the ability to tap into your home equity repeatedly will help you cover expenses that can add up quickly?

If you know why you are borrowing against the equity in your home, then you can make a clearer decision about which type of loan makes sense for you.  Still unsure about which loan is best for you? We can help!

Contact us to learn more about the full range of home lending options available to you. Our experienced and knowledgeable lending experts are here to guide you through every step of the process, helping you choose the solution that fits your needs and goals.  Let us help you make the most of your home’s equity. 

Contact Us Today!