HELOC & HELOAN
A home equity line of credit (HELOC) is a type of loan that allows homeowners to borrow against the equity in their home. It is a revolving credit line, which means that borrowers can borrow up to a certain amount, make payments, and then borrow against the credit line again as needed.
A HELOC works like a credit card, with a credit limit and a variable interest rate. The credit limit is based on the borrower's creditworthiness and the amount of equity in the home. The interest rate is typically based on the prime rate, which is a benchmark rate set by banks, plus a margin. The margin is determined by the lender and is based on the borrower's creditworthiness and other factors.
One of the advantages of a HELOC is that it allows homeowners to borrow against the equity in their home as needed, which can be convenient for unexpected expenses or large purchases. It also has a variable interest rate, which means that the rate can fluctuate based on market conditions. This can be beneficial if rates are expected to go down, but it can also be risky if rates are expected to go up.
A home equity loan (HELOAN) is a type of loan that is similar to a HELOC but with a fixed interest rate and a fixed repayment period. A HELOAN is a lump sum loan that is disbursed to the borrower at closing, and the borrower makes fixed monthly payments to repay the loan.
One of the advantages of a HELOAN is that it has a fixed interest rate, which means that the rate will not fluctuate over the life of the loan. This can provide borrowers with the peace of mind of knowing exactly what their monthly payments will be. It also has a fixed repayment period, which means that the borrower will know exactly when the loan will be paid off.