What is the difference between a home equity line of credit and a home equity loan?
A home equity line of credit offers flexibility to the borrower. It is an authorization to borrow up to a specific dollar amount. The customer can use as little or as much of the line of credit as needed, whenever it is needed. The line of credit will increase or decrease based on the current balance of the line and interest is only paid on
the borrowed amount. The rate is variable and based on Prime Rate.
With a home equity loan (HELOAN), you receive funds in one lump sum. For a fixed rate HELOAN, you will pay a fixed monthly payment for the term of your loan. For an adjustable rate HELOAN, the rate is fixed for the first set years (for example: five years for a 5/1 adjustable rate HELOAN). After the initial fixed rate period, the rate would adjust to Prime Rate plus 0% one time per year.