There are basically two types of home equity loans: a home equity loan (HEL) or a home equity line of credit (HELOC).
There are basically two types of home equity loans: a home equity loan (HEL) or a home equity line of credit (HELOC). Since the debt is secured by your home, the interest rate is typically less than that of a credit card or personal loan. Also, the interest paid on the loan may be tax deductible. (Always check with your tax or financial advisor before making any tax-related decisions).
Home Equity Loan (HEL)
A home equity loan, also referred to as a second mortgage, is best used in situations where you intend to use the funds for a specific purpose, like home improvements or a car purchase. The interest rate and the monthly payments are fixed. These get paid back in installments over a fixed period of time, typically 5-15 years. While the time to repay a loan is shorter than that of a traditional mortgage, borrowers like the certainty of having a fixed rate and fixed monthly payments.
Home Equity Line of Credit (HELOC)
A home equity line of credit is a revolving line of credit that allows you to access the funds as you need, instead of all at once. The interest rate is variable and in most cases tied to prime. The rate for which you qualify is usually based on your creditworthiness and your ability to repay the loan.
Advantages and disadvantages of using each type of loan
Knowing when to use which type of loan depends on your specific circumstances. If you have a long term remodeling project which requires cash installments over time, then a line of credit makes sense. If your home needs a major upgrade and you are making one large payment, then the stability of a home equity loan may be a better choice.
Advantages of HELs and HELOC
HEL (Home Equity Loan)
HELOC (Home Equity Line of Credit
Fixed interest rate. Although you pay interest on the entire borrowed amount, your rate is locked in if rates swing upward.
Variable interest rate. You pay interest on the amount you access from your line of credit, rather than the entire loan amount.
Attractive interest rates (lower than credit cards or personal loans).
Attractive interest rates (lower than credit cards or personal loans).
Loan interest may be tax-deductible.
Loan interest may be tax-deductible.
There is one lump sum of money borrowed.
Access to money as you need it.
Set monthly payments make it easier to estimate your expenses.
As you borrow more, the minimum repayment will increase. However, interest-only repayment options are available.
Can link into a relationship banking product to receive rate discounts, free services, or added benefits.
Can link into a relationship banking product to receive rate discounts, free services, or added benefits.
Disadvantages of HELs and HELOCs
HEL (Home Equity Loan)
HELOC (Home Equity Line of Credit
Required to borrow the entire amount upfront whether used or not.
Knowing money is available at any time can be tempting.
Fixed payments can take up to 15 years to repay
Variable interest rate could adjust upward.
There are usually fees that add costs to the loan amount.
There are usually fees that add costs to the loan amount.
Repayment of interest and principal begins as soon as you receive the money.
Interest-only repayment options are available from most lenders.
If you cannot repay or refinance the loan, then you may be forced to sell or lose your home.
If you cannot repay or refinance the loan, then you may be forced to sell or lose your home.
While the advantages for both types of loans may sound appealing, carefully evaluate whether the benefits each has to offer is worth incurring the additional debt. Compare home equity rates.
Ari Socolow: Ari Socolow is the Chief Economist and Editor-in-Chief at BestCashCow. He is particularly interested in issues relating to bank transparency and the climate crisis. Since co-founding BestCashCow in 2005, Ari has been frequently cited in the media as an expert on local and national savings accounts, CD products, mortgage and loan products and credit card rewards products.
Many homeowners like a fixed rate home equity loan, especially when rates are low, because they can plan their budgets better and not be surprised by higher payments due to their loan adjusting upward.
Conditions… Variable APR of Prime minus 1.01% in all states. Min loan amount $10,000. Max loan amount $200,000. 30-year term. Annual fee waived for the first year. See conditions for guarantee at thirdfederal.com.
Third Federal rate are typically 20% lower than other leaders
Guaranteed Lowest Rate
No closing costs, prepayment penalties, or minimum draw requirements
All terms are estimates until underwriting is complete. Offer shown includes a .50% discount for automatic payment enrollment (autopay enrollment is not a condition of loan approval). 10, 15, 20, and 30-year terms available (20 and 30 year terms only available for cash out requests). All terms have a 5-year draw period with the remaining term being a no draw period. Payments are fully amortized during each period and determined on the outstanding principal balance each month. Closing fees range from $750 to $6,685, depending on line amount and state law requirements and typically include origination (2.5% of line amount) and underwriting ($725) fees if allowed by law. Property must be owner-occupied and combined loan-to-value ratio may not exceed 80%, including the new loan request. Property insurance is required and flood insurance may be required if the subject property is located in a flood zone. You must pledge your home as collateral. Offers are only valid in states where Achieve is licensed. Loans are not available to residents of all states and available loan terms and fees may vary by state where offered. Contact Achieve Loans for further details.
Competitive rates, Pre-qualify in minutes
Mortgage Advisors standing by to help find the best solution
Please note that the interest rates offered are subject to change based on market conditions and borrower eligibility. The pricing and rate provided are accurate as of the specified date. It is important to be aware that the minimum loan amount for any loan program is $50,000. The specific amount and terms of the credit offer will be determined based on underwriting approval and guidelines, which include factors such as your credit history, your ability to make payments, and the available equity in your home.
To qualify for this offer, you must meet the required criteria and demonstrate creditworthiness. Additionally, providing up to two years of income verification may be necessary. The severity of your credit may also impact the required down payment. It is crucial to understand that the lender reserves the right to cancel this offer if the provided information cannot be verified.
Please note that all bankruptcies must be discharged in order to be eligible. This offer is nontransferable and is specifically available for single-family residences or owner-occupied condominiums. Please be aware that mobile homes and cooperatives are not included in this offer. It is important to note that the lender must hold a valid first lien position, and property hazard insurance is a requirement.
These are some key details to consider when evaluating this offer. It is essential to thoroughly review the terms and conditions and seek clarification from the lender regarding any specific questions or concerns you may have before proceeding with the application process.
Transform Your Home Equity Into Cash: Explore our Tech-Powered Solutions!
Unlock Your Home's Value: Discover the Power of our Online HELOC!
Maximize Your Equity: Get Cash-Out Using Our HELOC for Your Next Big Step
Secure Your Future: Experience the Ease of our Fixed Home Equity Loans
1. APRs for initial advances range from 8.25% to 18.00% based on funded HELOCs as of September 2024. Your actual rate will depend on many factors such as your credit history, loan-to-value ratio, line amount, loan term, lien position, and property state. The lowest rates are only available to the most qualified applicants. The APR is variable, but the APR that will apply to each draw will be fixed on the date the draw is made.
2. As of October 2024, 10% of funded HELOCs achieved a closing timeline of 6 days or less and a funding timeline of 10 days or less. This timeline assumes consumers close with our remote online notary, provide supporting documentation promptly, and ensure the information provided is accurate and consistent with our verification process. Delays, discrepancies, and other unforeseen factors may impact the closing timeline. MBA’s 2024 Home Lending Study reports an average industry closing time of 31 days.
3. A Home Equity Line of Credit has a variable rate. The APR may change, but the APR that will apply to each draw will be fixed on the date the draw is made. Your APR will be the Prime Rate at the time of draw plus a margin fixed for the life of the HELOC.
As low as 8.25% APR on your initial draw*
Get your money up to 5x faster than the industry standard*
The Figure Home Equity Line is an open-end product where the full loan amount (minus the origination fee) will be 100% drawn at the time of origination. The initial amount funded at origination will be based on a fixed rate; however, this product contains an additional draw feature. As the borrower repays the balance on the line, the borrower may make additional draws during the draw period. If the borrower elects to make an additional draw, the interest rate for that draw will be set as of the date of the draw and will be based on an Index, which is the Prime Rate published in the Wall Street Journal for the calendar month preceding the date of the additional draw, plus a fixed margin. Accordingly, the fixed rate for any additional draw may be higher than the fixed rate for the initial draw.
Fastest way to turn home equity into cash
Flexible terms, redraw up to 100%, borrow $20k-$400k
Approval in as little as 5 minutes. Funding in as few as 5 days.
Use to consolidate debt or finance your next home project
• Home Equity Loans & Refinance – Cash out
• Customized rate quote with no impact to credit
• Low Rates, Quick Approvals, Wide Range of Products
• 2024 Top 5 J.D. Power Ranking for Customer Satisfaction
Home Equity Loans & Refinance – Cash out
Customized rate quote with no impact to credit
Low Rates, Quick Approvals, Wide Range of Products
2024 Top 5 J.D. Power Ranking for Customer Satisfaction
Comments
Jonetta
January 12, 2011
auto insurance quotes ysdcm cheap auto insurance xqhjdu buy car insurance online >:-O propecia =)))
Is this review helpful? Yes:6 / No: 4
jamie
August 17, 2013
Many homeowners like a fixed rate home equity loan, especially when rates are low, because they can plan their budgets better and not be surprised by higher payments due to their loan adjusting upward.
Is this review helpful? Yes:7 / No: 3
Add your Comment
or use your BestCashCow account