What is the Difference Between a HELOC and a Home Equity Loan

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Homeowners have various ways to leverage their property to get favourable terms on loans. When they need quick access to a considerable amount of cash, two of the most common ways are home equity loans (HELOCs) and home equity loans.

Please read on to learn more about these options and what makes them different.

What’s a HELOC?

A home equity line of credit is a revolving line of credit homeowners can access by using their homes as collateral. Essentially, a borrower is reassured that the money they’re lending will come back to them because it’s a secured loan, staked against the property.

Leading financial brokerages like Burke Financial help homeowners tap into the equity available in their homes. Here are the basics of how it works.

First, the home’s current value is assessed by an independent inspector. Then, the amount of equity in your home is determined by subtracting this appraised value from any existing mortgages. The longer you’ve owned your home and the more monthly payments you’ve made, the more equity there is to borrow against.

A HELOC is an excellent way to access significant money quickly because the approval process tends to be quick. Borrowers can pay back their HELOC anytime and reborrow as needed.

How is a Home Equity Loan Different?

Home equity loans also let homeowners leverage tier property to get better borrowing terms quickly, but instead of a revolving line of credit, they get a lump sum payment. This is different than access to a line of credit, which they repay as they use.

A home equity loan can help you access up to 85% of your home’s equity, no matter your level of credit, debt, or income. If you work with leading brokerages, you can get a home equity loan, even if the bank refused you a loan.

Which Option is Better?

There are different types of home equity loans and HELOCs, so it’s hard to give general advice that isn’t oversimplified. Ideally, speak to a financial broker who understands your needs and goals, and they’ll give you advice about the right approach.

However, you may want to keep a few general principles in mind. A home equity loan is perfect when you know exactly how much money you’ll need. For example, if there’s an investment opportunity requiring a specific amount of money, a home equity loan could be ideal.

Things like home renovations can be a little more open-ended, and a HELOC may be better suited. Both approaches are used to tackle debt consolidation, reducing monthly payments, rebuilding credit, and more. Speak to a professional broker near you accredited by the better business bureau to get the right advice for you.

Life can involve some expensive, milestone purchases that were always challenging to afford and have become only more difficult with rising inflation and the problems facing supply lines. Homeowners have different ways to parlay their home’s equity to help them stabilize their finances. Speak to a broker near you to get personalized advice and support.