HELOC or Home Equity Loan
Good afternoon I live in GA and have a couple of questions please.
I’m trying to get renovations done on my home. I bought the house 10 yrs ago for 135k it is now worth 350k can you tell me if it’s worth me getting a HELOC or should I get home equity loan. I don’t quite understand the difference. Also, is there such a thing as a HELOC loan with 0%
Thank you
Terry Says
You REALLY need to understand the difference — AND the terms of any loan you decide to take out.
A home equity Line of Credit (HELOC) is merely a “promise” that you qualify to draw down money from your home equity in the future. The HELOC may specify or “lock in” a rate — but likely it won’t. You’ll pay the rate in existence at the time you draw down. Until you draw the money, you don’t pay interest.
And that rate may change every 6 months, or be fixed. AND, the repayment may be due at a specific time, or not.
The Home Equity Loan, is like a “second mortgage” on your home. You take down the full amount and immediately start paying interest. BUT, check the “terms” of the loan. It may say that your payments are “interest only” — with the full amount due in a “balloon” payment in perhaps 5 years. So, even though you are paying monthly interest-only, you still owe the full amount. It may look affordable, but will you qualify for a new loan in 5 years, and at what rate?
Examine all these issues carefully and ask a lot of questions BEFORE using your home as a piggy bank!
