Mortgage Choices: Home Equity Loan vs. HELOC
Gabriel TraversoLoanBiz Columnist
Finding the right home equity loan for you is all about
your intentions for the loan proceeds. When evaluating a equity loan, how do
you know which is right for you?
Home Equity Loan: The Stable Solution
A home equity loan is a
second mortgage you can use for just about anything--most loans have few
restrictions. If you're looking for a California home loan you can use to
consolidate large debts, make a down payment on an investment property, or take
care of an expensive medical emergency, then the home equity loan is a great
choice. This fixed second mortgage delivers a lump sum at closing and your
payments work just like a regular mortgage. You'll be limited in some cases to
85% of the equity you have in your home and pay higher interest than on a first
mortgage, but seconds cost much less to take out.
HELOC: First in Flexibility
If you're planning an
extensive remodeling project, especially if you want to do most of the work
yourself, then a home equity line of credit (HELOC) might be the California home
loan for you. This also works well for expenses, such as college tuition, that
you pay over an extended period of time. Like the home equity loan, you can use
the money for whatever you need. This loan works much like a credit card--but
with lower interest rates than most credit cards. The HELOC is a credit line
you can draw on and repay over and over, only paying interest on the amount you
use.
Mortgage Choices: Consider Your Goals
Take a look at your plans
for the money and use that to determine which loan is right for you. Both allow
you to draw on your home equity for cash. Additionally, most home equity loans
and lines of credit can offer tax advantages, such as deductible interest--but
check with your accountant for more information.
About the Author
Gabriel Traverso is a freelance writer, professional musician, and artist. He resides with his family in Reno, NV.
