Home equity is the difference between your home’s value and what you owe. As your equity grows, you can tap into it to make home improvements or pay off higher interest debt. Two common ways to tap into your home’s equity include a Home Equity Line of Credit or a Home Equity Loan.
Take your home equity, for example. Home equity is the difference between your home’s value and what you owe. As your equity grows, you can tap into it to make home improvements or pay off higher interest debt.
Two common ways to tap into your home’s equity include a Home Equity Line of Credit or a Home Equity Loan. Here are the differences:
A Home Equity Line of Credit (HELOC) is similar to a credit card. You have a certain amount of money available to borrow and pay back over time. Usually there is a variable interest rate, but that rate is often much lower, and tax-deductible.*
A Home Equity Loan, also known as a closed-end second mortgage, is a more traditional loan. The main difference being you receive all of the money in one lump sum. The interest is usually fixed and still a lower rate that is also tax-deductible.
When deciding between the two, determine how much money you really need and how you plan to use it. Factor in the interest and costs, but most importantly, avoid getting into a situation where you’re taking care of short-term needs with a long-term loan.
We’d love to help you determine which option is right for you. Stop by any Central Bank location today to speak with an expert.
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