Home Equity Loans / Lines of Credit (HELOC)
Home Equity Loan provides a lump sum of money, repaid over a fixed period with a fixed interest rate. HELOC Works more like a credit card with a revolving credit limit. You can borrow as needed during a “draw period” and repay over time with variable interest rates.
Rising Home Values
Interest Rate Environment
Cautious Lending Practices
Loans
Pros
Benefits of Home Equity Loans/ Lines of Credit (HELOC)
Lower Interest Rates
Beneficial for high-interest debt or financing large expenses.
Tax
Deductibility
If used to buy, build, or improve the home securing the loan
Flexibility
Can be borrowed and repaid multiple times within the draw period.
Fixed
Payments
Home Equity Loan Beneficial in times of rising interest rates.
Home Equity Loans: Key Features
Home equity loans: Usage
HELOC: Key Features
HELOC: Usage
Home Equity Loans: Key Features
- Lump-Sum Payment: A home equity loan is typically a one-time lump-sum loan
- Fixed Interest Rate: This generally comes with fixed interest rates, offering stability.
- Repayment Structure : Home equity loans have a structured repayment plan
Home equity loans: Usage
Home equity loans are often used for large, one-time expenses, such as:
- Home renovations
- Paying off high-interest debt (such as credit cards)
- Major medical expenses
- Funding education
- Large purchases like vehicles
HELOC: Key Features
- Revolving Credit Line
- Variable Interest Rates
- HELOCs usually have two phases:
- Draw Period
- Repayment Period
- Flexible Borrowing
HELOC: Usage
They are often used for:
- Home improvement projects done in stages
- Managing cash flow needs over time
- Funding unexpected or recurring expenses
- Emergency reserves