Home equity loans vs home equity lines of credit
Equity Loans vs. Equity Lines of Credit
A Interest rates on home equity loans and home equity lines of credit are almost always lower than non-introductory credit card rates. Current interest rates, loan cost information and helpful calculators can be found on websites such as www.bankrate.com. You could also call banks in the area to see whether they offer any unpublished promotional rates.
However, when deciding between a home equity credit line and a home equity loan, there are other factors to consider besides interest rates and fees.
For one, you need to have available equity in your home to borrow against. Traditionally, lenders like to see a loan-to-value ratio of 80 percent or less. In other words, if your home is valued at $200,000, the first mortgage and any additional home-equity loans should total less than $160,000. However, many lenders today offer loans up to 100 percent of home value.
You should also understand the differences in a credit line vs. a home equity loan. A credit line is revolving, with a variable interest rate that fluctuates depending on market conditions. A credit line requires monthly interest-only payments.
