Question:

How is home equity line of credit (HELOC) versus home equity loan (HEL) compared?

Answer:

A home equity line of credit (HELOC) versus home equity loan (HEL) is easy to compare.

While essentially they come as second mortgages on your home, they have some differences.

Home Equity Loan (HEL)

Acting like a second mortgage on the house, a home equity will usually let you use up to 90% of your home equity and can apply to any purposes - a car, tuition, healthcare, vacation. The good news is when applying for a home equity loan, the only significant cost to cover is that of a house valuation. Also, home equity lines have fixed rates for, say, 15 years.

Home Equity Line of Credit (HELOC)

A home equity line is simply a open-end home equity loan. You will receive a credit card or a checkbook to spend your HELOC limit. Some lenders will charge you HELOC account related fees; others will not. Your monthly HELOC payment depends on the amount you have spent. HELOCs rate adjusts every month according to the prime.

Both have significant tax deductibility benefits. Before you sign for a home equity line of credit (HELOC) or a home equity loan, make sure you are able to make your payments. Even if you are making only the minimum payments on a HELOC, you are still having your house as the collateral.

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
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