Home Equity Loan vs. Line of Credit: Which is Right for Me?

Home Equity vs. HELOC: Why a line of credit puts more flexibility in your story

With home values expected to rise significantly over the next year, 2020 is an ideal time to take out a home equity loan and write the next chapter of your family’s story. Do you know which type of loan will help you get to your fairy-tale ending?

A standard Home Equity Loan takes into account the value of your home versus what you still owe on your mortgage. The larger the difference between the two, the more loan money you may be eligible for. The borrower receives a fixed-amount loan and makes monthly payments, much like one would with a mortgage or auto loan. Your current home is used as collateral for the home equity loan, which means that you’ll want to keep up on payments to avoid late penalties and a possible foreclosure.

A second option is a Home Equity Line of Credit, or HELOC. This type of loan also takes into account the equity in your home and uses your residence as collateral. Interest rates are typically higher than first mortgage rates. However, its lengthy draw period, variable APR and easy repayment make the HELOC a more flexible option than standard home equity loans. Here are two reasons why a HELOC may pave an easier path to your happily-ever-after:

  1. It’s like having a genie in your pocket.

In practice, a HELOC works much like a credit card. Or a magic lamp. So, you’re not limited to a single project on your wish list. Borrowers have a set limit (for example, $70,000) and can take out as much or as little of that as they want. Redo your kitchen for $50,000 this year, and you’ll still have $20,000 left in your HELOC to use for projects later on.

  1. It piques (but not peaks) your interest.

When you choose to withdraw part (or all) of your HELOC funds, that portion of the HELOC is instantly locked in at the current interest rate. Not loving today’s interest rate? With a HELOC, you can wait for rates to drop before using additional funds.

In 2020, high home values will open new doors to make the upgrades and changes you’ve always dreamed of. Whether you choose to remodel all at once with a home equity loan or space out your renovations using HELOC funds, Coca-Cola Credit Union’s Home Mortgage Department is here to help you through the entire process.

Contact us today at 404-676-2586 inside Atlanta, 877-277-2596 toll free outside metro Atlanta, or email cumortgage@coca-cola.comand get started on the home of your dreams!




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