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“The Credit Union has something for everyone, from someone who is financially savvy to a person who just needs basic services.”


– Amy C.
Member Since 2010

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Home Equity Loans vs Home Equity Lines of Credit
Home Equity Loans vs Home Equity Lines of Credit

A Home Equity Loan is a second mortgage on your property made in addition to your original loan. It allows you to borrow against the equity in your home that has grown with its increased value and/or as your original mortgage has been paid down. With a home equity loan, you receive a lump sum payment at closing.

 

A Home Equity Line of Credit (HELOC) is similar to a Home Equity Loan in that the loan amount is also determined by the equity you’ve built in your property. However, instead of receiving a lump sum at closing, you are given a credit line from which you can draw funds whenever you need to, up to your credit line limit.

 

The following is a comparison you can use to determine which loan is right for you.

 

You may consider a Home Equity Loan if you:

  • Want to consolidate debt, such as high-interest credit cards. Depending on the interest rate, a fixed home equity loan may lower your monthly payment to one low, fixed payment.
  • Know the exact loan amount you would need. If you are not sure of the amount of cash you will need, you may want to consider the HELOC, which allows you to draw funds from the account as you need them.
  • Like a fixed monthly payment for a fixed term. Because the HELOC is a variable-rate line of credit, the payments on that type of loan may vary every month based on changes to the interest rate and/or the balance you owe, whereas payments on Home Equity Loans remain the same each month.
Learn more about Home Equity Loans. 

 

You may consider a Home Equity Line of Credit if you:

  • Want to have funds available in case of an unexpected expense. With a HELOC you will only have to make payments on funds you draw from the account. You will be able to draw from the funds, up to your account limit, whenever you need the funds.
  • Need to borrow funds that you plan on paying off within a short time. As you repay the outstanding balance, your available line of credit is replenished.
  • Want to take advantage of interest-only payments. For the first ten years of your line of credit, we will only require you to make interest-only payments. By doing so, your principal balance is not being paid down, but your interest owed is being paid.

Learn more about Home Equity Lines of Credit.

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