| When considering sources of finance, home equity | | | | rate. |
| loans and home equity lines of credit stand out as the | | | | Loan amount |
| cheapest and more flexible financial options. However, | | | | Home equity loans come with a fixed loan amount that |
| you may wonder what the differences between | | | | can equal or be a bit higher than the home equity |
| home equity loans and home equity lines of credit are. | | | | value. Home equity lines of credit are somewhat |
| Home Equity | | | | different: There is no loan amount, a credit maximum |
| When you have a mortgage on your home but the | | | | amount is set and you can borrow as much money as |
| value of the property exceeds the amount owed, the | | | | you need up to that amount. For example: If a $50.000 |
| difference between the outstanding debt and the | | | | limit is set you could borrow $10.000 and a month later |
| property value is referred as Home Equity. This | | | | borrow $20.000 more. And so on till you reach the |
| remaining property value can be used to guarantee | | | | credit maximum. |
| another loan: A Home Equity Loan or Line of Credit. | | | | Repayment |
| Home Equity Loans are secured loans with a fixed or | | | | Home equity loans come with a fixed repayment |
| variable interest rate, a fixed loan amount and a fixed, | | | | schedule which has to be followed strictly with some |
| though negotiable, repayment program. A home equity | | | | exceptions. Though, there are in some cases grace |
| loan is just like any other loan, only it is secured with | | | | periods and waivers you could apply for, if you request |
| the equity you have built on your home and thus | | | | a home equity loan you will probably have rigid |
| carries fewer interests. | | | | installments or at least a fixed amount plus a variable |
| A Home Equity Line of Credit on the other hand, | | | | amount depending on interest rate variations. |
| comes only with a variable interest rate, there is no | | | | Home equity lines of credit let you repay the amount |
| fixed loan amount, though there is a credit maximum | | | | you owe they way you want to do it. You have an |
| and the repayment is extremely flexible. The home | | | | open line of credit where you can borrow and repay |
| equity line of credit is also secured on the home equity. | | | | as much as you want as long as you do not exceed |
| Interest Rate | | | | the credit limit. Moreover, as opposed to home equity |
| Since both are secured, the interest rate charged is | | | | loans, lines of credit do not require to be renewed as |
| considerably low. Only home equity loans with a fixed | | | | you can always borrow more as long as there is |
| rate can have a slightly higher interest. Home equity | | | | credit left. If your home equity grows either by an |
| loans with a variable rate usually carry a somewhat | | | | increase on your property value or because of a |
| lower interest rate. Home equity lines of credit, on the | | | | reduction on your mortgage debt, you can ask for |
| other hand, carry only a variable interest rate that is | | | | your credit maximum to be recalculated. |
| usually similar to the home equity loan fixed interest | | | | |