If you’re a homeowner, home equity loans & lines of credit can be one of the best ways to borrow. With these funds, you can do a variety of things including;
- Pay for major remodeling projects, like a new roof or finished basement
- Save money by consolidating higher-interest rate loans and credit cards
- Cover expenses for education or emergencies
Home Equity Lines of Credit
A home equity line of credit is a revolving line taken out with your home’s equity (appraised value minus mortgage debt) as collateral.
With a home equity line of credit, you’ll receive a credit limit up to 95% of your home’s equity* to withdraw and use as you need, when you need it, at a low variable rate!
- No annual fee and low closing costs
- Easy access through online banking
- Competitive variable rates
- Interest-only payment options available
Access is easy with online banking or with specially issued equity line checks.
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Home Equity Loans
Home equity loans (often called second mortgages) bear many similarities to conventional loans because they feature fixed interest rates for fixed period of time.
A home equity loan is often used for a large purchase or debt consolidation.
- Competitive fixed rates
- Terms from 5 to 15 years
- Borrow up to 95% of the home's loan to value**
- Interest rate is determined by the amount of equity and the term
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Home Equity Lines of Credit vs Home Equity Loans
Before you can decide whether a home equity line of credit (HELOC) or a home equity loan (HELOAN) is the right choice for you, you need to be aware of the differences between the two types of financial products.
The main difference
The main differentiator is that HELOANs come with a fixed interest rate, meaning your rate won’t fluctuate at any point over the life of the loan. HELOCs, on the other hand, have variable interest rates that rise and fall with the market.
Consider rate differences
Initially, you might think that home equity loans are the best way to go because you will always know what your rate is. If, however, current interest rates on loans are quite high, home equity lines of credit may be more appealing. Once rates fall again, you will reap the benefits.
Consider what’s best for your specific situation & financial future
It’s also important to know yourself and your financial preferences before choosing a HELOAN or a HELOC. Some homeowners prefer knowing what their monthly payments will be for the long term because it allows them to budget more easily. Others, though, are natural risk-takers and would rather take their chances with fluctuating rates.
Access to funds
Another key difference between home equity loans and lines of credit is how homeowners gain access to their money. The funds from HELOCs are deposited into accounts that homeowners are given access to. If you go this route, you will only have to pay interest on the money you actually spend. HELOANs, however, are dispersed in the same manner as other personal loans. The full amount will be deposited into your checking account and you will be required to pay the total sum back whether or not you use it all.
If you’re not quite ready to apply, you can find much more educational information at our MortgageClick online resource or scroll down to work with an expert from our Mortgage Team.
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*Property must be primary residence in the state of Ohio. Equity Rate is subject to quarterly adjustment. ** Qualified buyers. MortgageClick Reg. U. S. Pat. & T/M off. Consult our tax advisor regarding new deductibility rules.