Home equity loan or a home equity line of credit?

April 12, 2011 — Many mortgage lenders offer both home equity loans and home equity lines of credit. The information below can help you decide which may work best for you.

Stable payments with a home equity loan
For immediate cash, consider the advantage of a fixed-rate home equity loan. You’ll enjoy a low interest rate, with the added security that the interest and payment is fixed through the loan term.

Flexible terms with a home equity credit line
A home equity credit line is a revolving line of credit you can access, as you need it. You can open the line now based on available equity, with no obligation to use the money, but you’ll have the peace of mind knowing cash is available in the future. When you’re ready to use the funds, you’ll have convenient access through home equity checks. And, you won’t pay interest until you use the money. You’ll also have an interest-only payment option that allows you to control your payments to meet your current needs.

Either way, save with a low interest rate
You could save hundreds, even thousands of dollars a year in interest costs. Compare a low home equity rate with the interest you may be paying on credit cards and other loans, and you’ll quickly see the savings.

Reduce your taxable income
Unlike other types of credit, the IRS may allow you to deduct home equity interest. Purchases you’d make with other types of loans bring you a tax bonus when you use home equity credit instead. Please consult your tax advisor regarding the deductibility of home equity interest.

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