Understanding the Difference Between Home Equity Line of Credit and Home Equity Loan
According to the statistics, the value of homeowner equity in the United States is approximately 18.72 trillion U.S. dollars in 2019. Many people buy residential property to build equity and long-term wealth creation. Some of them take advantage of that equity to raise more finance. A home equity line of credit (HELOC) and a home equity loan are two excellent ways to secure financing using your home equity. Let’s compare and contrast between both options to give you a better idea: Home equity line of credit A home equity line of credit, as the name, suggests is a line of credit that allows a borrower to obtain up to a specific amount of their home equity. HELOC comes with variable interest charges and requires to be repaid gradually over time.The borrower can secure finance during the draw period and only need to pay interest payments. The draw period, which is usually 10 to 20 years, is followed by a repayment period, where the borrower is liable to pay for princi