|
Home equity loan
Do you need to tap into your home’s equity to pay for a home remodeling project or to pay off a credit card? A home equity loan is a fixed or adjustable rate loan that is secured by the equity in your home. With a home equity loan, you borrow a lump sum of money to be paid back monthly over a set time frame, much like your first mortgage. The terms home equity loan and second mortgage are often used interchangeably.
The process for a home equity loan is similar to your first mortgage. The closing costs (often 2-3 percent of the loan amount) are usually lower and, although the interest rate is higher on a home equity loan, the interest paid is usually tax deductible. Talk to your tax professional about your particular situation.
The main difference between a home equity loan and a home equity line of credit (HELOC) is that with a loan, you get the loan proceeds all in a lump sum and your monthly payment is based on that loan amount. With a HELOC, you have a line of credit you can take all at once, or draw on it as needed and your payment is based on the amount of credit you are currently using, not the whole line amount.
At USA Mortgage, myself and my staff can help you decide which is the better option for you.
|