If you’re looking to access your home’s equity, there are two powerful options to consider:
A Home Equity Line of Credit (HELOC) and a Home Equity Loan. Both are second mortgages, but they’re designed for different financial goals.
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A Home Equity Line of Credit (HELOC) is a revolving line of credit, similar to a credit card, secured by your home. You can borrow as needed—up to your approved limit—and repay only what you use.
Key Features:
A Home Equity Loan provides a lump sum upfront with fixed monthly payments over a set term. It's predictable and ideal for one-time needs.
Key Features:
Your Goal Consider This Need funds over time HELOC Want fixed monthly payments Home Equity Loan Project is ongoing or flexible HELOC Have a one-time expense Home Equity Loan
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A HELOC works like a credit card. The borrower is approved for a credit line, and they can draw from it as needed. They only pay interest on the amount borrowed, and the credit line is replenished as they pay it back.
A home equity loan is a lump sum loan that is borrowed against the equity in a home, while a HELOC is a revolving line of credit that can be drawn from as needed.
A HELOC can provide homeowners with access to funds for large expenses, such as home improvements or medical bills. It can also be a helpful tool for consolidating high-interest debt or covering unexpected expenses.
The main risk of a HELOC is that it is secured by the borrower's home, so if they are unable to repay the loan, they could potentially lose their home. Additionally, if interest rates rise, the borrower's monthly payments could increase.
The amount a borrower can borrow with a HELOC is typically based on the equity they have in their home, as well as their credit score and income. Lenders may also have limits on the amount they are willing to lend.
HELOCs typically have a draw period, during which the borrower can draw from the line of credit, followed by a repayment period, during which the borrower must repay the loan. The length of these periods varies by lender, but typically ranges from 5 to 25 years.
Lenders may charge fees for a HELOC, such as application fees, appraisal fees, and closing costs. It's important to understand these fees and factor them into the total cost of the loan when considering a HELOC.
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Robert St. John | NMLS #1578510 | Barrett Financial Group, L.L.C. | NMLS #181106 | 8485 W. Sunset Rd. #202, Las Vegas, NV 89113 | AZ 0904774 | CA 60DBO-46052 & 41DBO-148702 Licensed by Dept. of Financial Protection & Innovation under the California Residential Mortgage Lending Act. Loans made or arranged pursuant to a California Financing Law License | NV 5091 | Equal Housing Opportunity | This is not a commitment to lend. All loans are subject to credit approval. | nmlsconsumeraccess.org/EntityDetails.aspx/COMPANY/181106 | barrettfinancial.com