Home equity loans and lines of credit are powerful tools that give homeowners simplified access to cash to use however they wish. Although alot alike, there are several key items that differentiate these home equity products. Make sure you clearly understand both products before tapping into your home’s equity for home improvement, purchase of a new car, etc..

Home market values are always on the move. The difference between a home’s market value and any outstanding mortgage balance equals the equity. For example, if your home is valued at $180,000, and you owe the mortgage lender $80,000, then your available home equity equals $100,000. With a home equity loan, the homebuyer may choose to access all, or part of the home’s equity.

What Makes a Home Equity Loan Unique?

Home equity loans are comparable to other forms of personal loans. In most cases, personal loans are secured with a vehicle title or some other piece of property as collateral. With a home equity product, your house is the collateral.

Most home equity loans offer competitive fixed rates and payments that are amortized over 15 years. At closing, the homeowner receives the funds in a lump sum which can then be used towards any purpose. As with most loans, the homeowner may choose to pay the loan off faster than scheduled.

Benefits of a Home Equity Line of Credit?

As with home equity loans, lines of credit are also based on the home’s available equity. However, instead of funds being supplied in a lump sum, credit lines are essentially revolving credit accounts. For example, if approved for a $150,000 credit line, a revolving credit account is established for this amount, and homeowners are free to withdraw funds up to this limit as necessary.

Lines of credit are like credit card cash advances in many ways. However, the rates are much more favorable and the homeowner can stretch out the payback period over a much longer period of time. Most credit lines have variable rates like credit cards (using some factor of either the prime rate or LIBOR), and as such, payment amounts can and do change.

If you’re in the market for a home equity loans or home equity line of credit Easy-Home-Equity-Loans.com can help. Check out our website for current offerings, helpful articles and tips on securing the best home equity product for your needs.