HELOC or Home Equity Loan - What Option Is Right For You?

When deciding to borrow against your home's equity, you will need to decide between a Home Equity Line of Credit (HELOC) or a Home Equity Loan. While similar, these two differ when determining the most beneficial option for your unique situation.

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Table of Contents

1. What is a HELOC?
2. What is a Home Equity Loan?
3. What Option is Best For You?

What is a HELOC?

A Home Equity Line of Credit (HELOC) allows you to borrow against the equity in your home, offering flexible terms and potentially lower rates compared to other loans.

Key Features of a HELOC

• Credit Line: Borrow against your home's equity with a revolving line of credit (What does this mean? Much like a credit card, you can borrow funds, pay it back, and then borrow again)
• Interest Rates: Fixed or variable rates that may cause payment fluctuation

How HELOCs Work

• Borrow and Repay: Like a credit card, you can borrow, repay, and borrow again
• Monthly Payments: Include a portion of the principal, interest, and annual fees
• Flexible Use: Unlike Home Equity Loans, HELOCs allow you to borrow as needed, not in a lump sum

FSB's HELOCs are straight lines of credit that draw for the loan's entire life. When your HELOC matures or comes due, repay the balance or re-apply for another loan. All new applications are subject to underwriting and approval.

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What is a Home Equity Loan?

A Home Equity Loan allows you to borrow against the equity you have built in your home. Home equity loans offer a fixed interest rate and repayment terms and will not change unless refinanced.

Key Features of Home Equity Loans

• Fixed Interest Rate: The interest rate is fixed and influenced by factors such as your credit score and home equity position
• Lump Sum Payment: Receive all funds in one lump sum after closing

How Home Equity Loans Work

• Monthly Payments: You will be required to make monthly payments on the loan
• Borrowing Amount: Know how much you need to borrow before committing to the loan

Typically, a homeowner must have roughly 15% equity to qualify for a Home Equity Loan.

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What Option is Best For You?

A HELOC may be the right option if you need flexibility, don't know the exact amount to borrow, and can manage varying payments based on interest rates.

A Home Equity Loan may be the right option for those who know the precise amount they need, prefer predictable monthly payments, and have at least 15% equity in their home.

If you want additional advice on the best solution, speaking to your consumer lender is always a good idea. They can often provide additional, market-specific information that will allow you to make an educated decision about your home equity.

FSB's Home Equity Loans & Lines

Meet Tammy Yamilkoski

Tammy, with over 25 years of experience in mortgage lending, has assisted thousands in achieving their American Dream. As Vice President of Mortgage at the Hiawatha Branch, she's known for building lasting client relationships. Tammy is dedicated to going the extra mile, leveraging her extensive knowledge of loan programs to secure the best options for her clients, ensuring a stress-free, on-time closing. Reach out to Tammy for expert advice today! Call 319-730-6992 Email TammyYamilkoski@fsbmail.net This email is not secure, please do not include sensitive financial information.

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