What's better a home equity loan or a line of credit?
Answers:
The interest on either an equity line or loan both can be tax deductible depending on what you use the proceeds for.
Which one is better depends on how you intend to use it.
Say you're doing some home improvements and won't need all the cash at once. In this case an equity line would be a better choice because you only pay interest on the amount you have borrowed on the line (much like a credit card). And as you pay down the balance, you can re-borrow those funds over and over again. Lines are mostly tied to prime and usually have interest-only minimum payments with the option to pay extra towards principal. Most are variable rates, although some fixed-rate line options are available as well. Lines usually have a yearly fee.
However, if you're using it to make a large one-time purchase, you may find more favorable terms on a closed-end loan. Closed-end loans pay out the proceeds all at once and typically have a payment structure that pays down your balance over time. Although some interest-only options are available. These types of loans usually have fixed-rates and no yearly fees.
I would recommend contacting a mortgage broker to discuss your particular needs. Many factors could determine which type is best for your individual lifestyle.
Things to ask: yearly fees; closing costs; pre-payment penalties; early termination fees
A broker can shop several different lenders for you with just one call.
Good luck!
To me. it's a line of credit. You only pay interest on the money you borrow, and it allow flexability in your financial decisions. Typcially, the LOC is connected to the prime rate, and a HELOC is a fixed interest rate.
Depends. With a home equity loan you can get Tax credit on the interest you pay.
Neither. Both are big mistakes. You will end up kicking yourself for further encumbering your house, Go ahead and look at all the thumbs down, but when the loan is 3 years old and all the shiny stuff has lost it's shine remember what this old fart on yahoo told you.
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