Home Equity Loan Versus Home Equity Line of Credit
by admin ~ January 12th, 2009.Both home equity loans and home equity credit lines are second mortgages, but these home equity products do have some differences with the interest rates and terms. First of all home equity loans are installment loans with a fixed interest rate amortized on a set term. The monthly payment for an equity loan is the same the first payment as it is the final payment.
Home equity lines of credit naturally have a variable interest rate. For the draw period, the borrowers are only required to make a minimum payment of interest only, but the minimum payments do not pay back any portion of the money borrowed. With a HELOC, borrowers will only be charged interest on the amount of money they accessed. Remember though that the home equity lines have adjustable interest rates and in a volatile market, we recommend a fixed interest rate mortgage. Home equity rates remain low but will the record low interest rates be available forever?
What are the differences with home equity lines and home equity loans?
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