The Difference Between HELOCS & Home Equity Loans
Q: Now that our home has appreciated some, my wife and I are considering tapping our increased equity to pay down some credit card debt. Should we get a home equity loan or HELOC? Are they the same thing? Casey, Roswell, GA
A: Good question. Home equity loans and HELOCs are similar but they are not the same. Both home equity loans and HELOCs are types of secondary mortgages on a home, however, a home equity loan has a fixed interest rate, fixed loan amount and a fixed repayment schedule. On the other hand, a HELOC, which stands for a home equity line of credit operates like a credit card by offering a variable interest rate that allows you to tap into home equity up to a limit which over time typically converts to a fixed-rate loan that you have to repay. Thanks for your question, Casey.
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