Should you use a home equity loan or a home equity line of credit?

At some point, you’ll probably think about renovating your home to accommodate, let’s say, the new addition to your family. But the problem is, you don’t have the money to pay for the renovation. As a homeowner, you may want to consider getting either a home equity loan or a home equity line of credit (HELOC).

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A home equity loan and a home equity line of credit (HELOC) are loan options commonly described as second mortgages secured against the equity of the same property. As second mortgages, they’re used to fund major expenses such as home improvement, education, and medical care. The specific difference between the two loan types is that home equity loan borrowers will receive a one-time cash lump sum to finance their needs while HELOC borrowers are allowed to withdraw money up to a credit limit pre-approved by the lender.

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Home equity loans have a fixed interest rate and fixed term. Usually, borrowers are given 10 to 15 years until the entire loan has been paid up. In HELOC, there’s an adjustable interest rate and borrowers can choose when and how often to withdraw money. HELOC works like a revolving credit loan, which is why it’s trickier than the lump sum loan.

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Both Home equity loans and HELOC use your home as a collateral, which means that you could lose one of your most valuable assets in case you fail to pay the loan. In this sense, you may want to ask yourself, “Is home remodelling worth the money?”

Tap into the power of your home’s equity with Network Capital Funding. Visit this website to learn how to apply for a home equity loan.