n its simplest definition, a lump sum loan at once since you
home equity loan means can withdraw any amount of the
using your house equity as loan when you need it. In a
collateral in order to borrow sense, it works like a credit
money. Collateral means your card.
house will act as a guarantee. In
The interest rate for a home
the case if you cannot pay the equity line of credit is variable
loan or defaulted too long on and will rise and fall during the
payment, the lender has the right loan period. Payment per month
to sell the house to get back the depends on the total sum loaned,
loan. the interest rate and whether
The word equity simply means how your credit is in the payment or
much the house is worth minus the draw period.
mortgage you currently owe.
During equity draw period, you
There are two types of equity can decide whether to pay the
loan
principal loan amount or the
1) Home Equity Loan
minimum payments to cover the
A home equity loan is a one interest.
off lump sum of money when you
For equity line of credit, the
take up a loan. Usually, the loan loan period is usually shorter
period is between 5 to 30 years than home equity loan. Usually,
and the interest rates are fixed. it is between 5 to 15 years.
The payment amount per month is During this loan period, you will
fixed as well.
not be able to increase the loan
2) Home Equity Line Of or repay the balance left in the
Credit
loan. Do note, there is usually a
A home equity line of credit minimum amount whether you decide
allows you to borrow a fixed to withdraw some money from the
amount of money for the life of loan.
the loan. You do not need to take
As you see, an equity loan
line of credit has greater google_ad_channel
flexibility compared to home ="3545651507";
equity loan. However in both
cases, if you decide to sell the google_color_border =
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paid, you are required to pay the
balance immediately. google_color_bg = "FFFFFF";
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About the Author:
Ricky Lim works in a finance company specializing in Home Refinancing Loans. Visit his site at http://www.about-homeloan.com for countrywide home loans rates and a free home loan calculator
