A home equity loan allows you to borrow against the equity you have built up in your home. Equity is the difference between your home's market value and what you still owe on your mortgage. Home equity loans are often referred to as second mortgages because they are secured by your home.
: Fixed interest rates and monthly payments. Lump sum payment upfront, ideal for large renovation projects. Loan terms typically range from 5 to 30 years.
: Fixed payments make budgeting easier. Lower interest rates compared to unsecured loans. Interest may be tax-deductible if the funds are used for home improvements.
: Your home is used as collateral, putting it at risk if you fail to repay. Limited to the amount of equity you have built up. : Homeowners with significant equity who need a large sum for a major renovation project.
A HELOC is similar to a home equity loan but functions more like a credit card. You are approved for a maximum amount, and you can draw from this line of credit as needed during a set draw period, usually 5 to 10 years. You only pay interest on the amount you borrow.
: Variable interest rates. Flexible borrowing options, allowing you to withdraw funds as needed. Interest-only payments during the draw period, followed by a repayment period.
: Flexibility to borrow what you need when you need it. Lower initial payments during the interest-only draw period. Can be used for ongoing or phased renovation projects.
: Variable rates mean payments can increase. Your home is.