| This is a comprehensive report on the differences | | | | used later. |
| between home equity loans & a line of credit with | | | | Home Equity Loan - Receive entire loan amount at |
| references to loan funds availability, interest rates, | | | | closing in a lump sum. You can not reuse this loan |
| payment structures, loan advances, rate advantages | | | | amount after principal is paid back. |
| and tax advantages. | | | | (b) Interest Rate: Home Equity Line of Credit - Variable |
| As of lately, obtaining cash from one's home has | | | | rate. Beyond the first monthly billing cycle, your interest |
| never been simpler for homeowners. With the low | | | | rate is determined monthly, usually determined by the |
| interest rates over the last few years, everyone that | | | | prime rate, when posted in The Wall Street Journal, in |
| wanted to refinance has done so leaving the lending | | | | addition to a operational margin. |
| market semi- stagnant. | | | | Home Equity Loan - Fixed rate, Interest and payment |
| At this point, lenders are anxious to loan to anyone | | | | stays the same. |
| that barely meets their criteria. Knowing what type of | | | | (c) Payment Structure: Home Equity Line of Credit - |
| loan that suits your situation best is very important | | | | Monthly payments vary with interest rate and amount |
| before you feed yourself to the "loan lions"! | | | | of principal which has been borrowed. These loans |
| There has been a recent flood of companies offering | | | | have a draw period, usually of 5 or 10 years, during this |
| home equity loans and lines of credit. To make Home | | | | time you have the option to pay only the interest, |
| repairs or put on additions, more and more Americans | | | | however beyond the draw period you must repay the |
| are looking toward lines of home equity credit rather | | | | principal and interest to pay down the loan within the |
| than a traditional home equity loan(also known as a | | | | remaining years. |
| second mortgage). | | | | Home Equity Loan - Interest and principal payment |
| Americans need to consider multiple things prior to | | | | stay the same during the loan term. |
| utilizing either of the above two financing products. | | | | (d) Loan Advances: Home Equity Line of Credit - |
| Home equity lines of credit usually are appropriate for | | | | Simply write a bank draft for $250.00 or more. |
| people who need a lower beginning rate and availability | | | | Home Equity Loan - Entire amount is received at |
| to money at unpredictable times. A home equity line is | | | | closing. |
| also good if you are unsure what the project will cost. | | | | (e) Rate Advantages: Home Equity Line of Credit - |
| Many homeowners are doing the contracting | | | | Less interest rates than your unsecured credit lines |
| themselves. In this case a home equity line of credit is | | | | such as credit cards. |
| best as you simply pay for the project in an ongoing | | | | Home Equity Loan - Lower payment options are |
| basis until completion, thus borrowing only what is | | | | available due to a variety of terms. |
| needed and not coming up short due to unforeseen | | | | (f) Tax Advantages(Ask your tax advisor): The |
| overages. | | | | interest on both types of loans may be 100% |
| Home equity loans are more appropriate for those | | | | deductible! |
| who need specific amounts of cash with payment | | | | (g) Other Advantages: Home Equity Line of Credit - |
| stability. | | | | Appropriate emergency fund for unexpected |
| The biggest difference between these loans is the | | | | emergencies or expenses. Can incorporate multiple |
| method in which you receive your money. | | | | projects at one time. |
| Using a home equity loan, you receive the whole | | | | Home Equity Loan - Single use, less temptation to |
| amount of money at closing. | | | | borrow more by just writing a check. Stable loan with |
| Using a home equity line of credit, one can borrow | | | | a fixed rate, fixed payment and easier to budget for. |
| cash when needed, up to a pre-determined amount of | | | | Our intention with this report was to clear up the |
| credit. | | | | confusion between the two loans. Always be sure to |
| See the following comparison for additional details. | | | | do your due diligence before you apply for any type of |
| (a) Loan Funds Availability: Home Equity Line of Credit | | | | loan. Make sure you are well informed before seeking |
| - Borrow money when needed. You can borrow up to | | | | a lender. I know it's hard to believe but not all lenders |
| the stated credit limit. When you pay down principal it is | | | | will be honest and upfront with the finer details of the |
| added back onto the balance of your credit line to be | | | | loan you seek! |