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Started By
Message
Home Equity Loan vs a Home Equity Line of Credit
Posted on 1/5/15 at 2:52 pm
Posted on 1/5/15 at 2:52 pm
Which one is better. My house was appraised for 220K and I owe 130K on it. I was looking for about 15K from the bank. Any ideas which one would be better for me to get? TIA.
6
Posted on 1/5/15 at 3:03 pm to Porter Osborne Jr
Check rates obviously.
A loan is that a loan for 15k at a fixed term and rate I would assume.
If it's a line of credit, you would be issued a credit card and pay a small payment depending on what type of advances you do. if you needed more you can tap into it, compared to a loan, where you would have to reapply for more funds.
A loan is that a loan for 15k at a fixed term and rate I would assume.
If it's a line of credit, you would be issued a credit card and pay a small payment depending on what type of advances you do. if you needed more you can tap into it, compared to a loan, where you would have to reapply for more funds.
Posted on 1/5/15 at 3:15 pm to Porter Osborne Jr
I have a HELOC, which I like the flexibility of. It's there for emergencies if for some reason our savings is wiped out. If I recall when I got it there was no difference in interest rates for just a home equity loan. They really pushed the LOC on me, and I didn't see much difference in the two.
Posted on 1/5/15 at 3:21 pm to Porter Osborne Jr
HE Loan:
*Fixed rate
*Fixed payments for ______ years (know exactly when it will be paid off)
HELOC:
*Variable rate
*Variable payments amounts
*Term is usually 10 years (don't know exactly when it will be paid off)
*Can have a credit limit usually up to 90% LTV (up to 68k in your situation...only draw what you need)
*Can continue to borrow against HELOC as needed without reapplying for credit
Personally I like a HELOC, but both have their pros and cons depending on the individual situation.
*Fixed rate
*Fixed payments for ______ years (know exactly when it will be paid off)
HELOC:
*Variable rate
*Variable payments amounts
*Term is usually 10 years (don't know exactly when it will be paid off)
*Can have a credit limit usually up to 90% LTV (up to 68k in your situation...only draw what you need)
*Can continue to borrow against HELOC as needed without reapplying for credit
Personally I like a HELOC, but both have their pros and cons depending on the individual situation.
Posted on 1/5/15 at 3:22 pm to The Spleen
quote:
I have a HELOC, which I like the flexibility of. It's there for emergencies
+1
Posted on 1/5/15 at 3:27 pm to Porter Osborne Jr
I would look at the rates. The HELOC would seem superior in every way, except in a situation in which interest rates skyrocketed, causing the variable rate to rise well beyond the rate if you had gotten a fixed rate, term, and amount.
Posted on 1/5/15 at 3:27 pm to mglsu21
How much do the rates very for the HELOC? Is it gonna go up and down wildly or does it stay reasonably close?
Posted on 1/5/15 at 3:30 pm to Porter Osborne Jr
It is usually based upon prime rate +/- depending upon credit. Seen places offering 4% HELOC right now. Rate should usually stay somewhat close to the current mortgage rates. However it could change from month to month, or however often the feds convene.
Posted on 1/5/15 at 3:50 pm to The Spleen
quote:
They really pushed the LOC on me, and I didn't see much difference in the two.
That's probably because they make commissions/bonuses based on HELOCs they open. We had one several years ago because it helped a friend of ours hit their goal and it didn't cost us anything.
Posted on 1/5/15 at 9:55 pm to Porter Osborne Jr
HELOC is variable rate with a rate of 3.25%, hasn't changed in about seven years and most banks tie it to the wall street indexes, think of them as a big credit card where you're billed about 1.5% of the balance monthly. Home equity loan is going to be a fixed rate recurring loan payment. If you see yourself needing to finance several projects over the next 10 yrs go with a HELOC. 9 years in the industry, VP of a bank. Also, most banks eat HELOC fees so long as you leave it open for a few years.
This post was edited on 1/5/15 at 9:58 pm
Posted on 1/6/15 at 5:18 am to Porter Osborne Jr
HELOC no brainer
Posted on 1/6/15 at 7:03 pm to Rhino5
If I borrow about $15,000 how much would my monthly payments be if I went that direction?
Posted on 1/6/15 at 9:44 pm to Porter Osborne Jr
That's about $225 minimum payment. The selling point is the flexibility like someone mentioned. If you see yourself needing to buy an auto, redecorate a kitchen, add on a porch etc.. then a HELOC is nice since you don't have to fill out a new loan application each time and pay a processing fee. You just have a limit on how much you can borrow with a HELOC.
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