A HELOC and a HELOAN are both types of loans that allow homeowners to borrow against the equity they have built up in their homes. However, there are some key differences between the two.
Firstly, let’s talk about a HELOC. A Home Equity Line of Credit is a revolving line of credit that works similar to a credit card. With a HELOC, homeowners are given a maximum borrowing limit, and they can borrow and repay funds as needed within that limit. The interest rates on a HELOC are typically variable, meaning they can fluctuate over time. This means that the monthly payments on a HELOC can vary depending on the interest rate changes. Additionally, the interest paid on a HELOC may be tax-deductible, but it’s always best to consult with a tax professional for specific advice.
On the other hand, a HELOAN, also known as a Home Equity Loan or a second mortgage, is a lump sum loan that is borrowed against the equity in a home. Unlike a HELOC, a HELOAN provides homeowners with a fixed amount of money upfront, which is then repaid over a set period of time with fixed monthly payments. The interest rates on a HELOAN are typically fixed, meaning they remain the same throughout the loan term. This allows homeowners to have a predictable monthly payment amount. Similar to a HELOC, the interest paid on a HELOAN may also be tax-deductible, but it’s always best to consult with a tax professional for specific advice.
In summary, the main difference between a HELOC and a HELOAN lies in how the funds are accessed and repaid. A HELOC provides homeowners with a revolving line of credit, allowing them to borrow and repay funds as needed, while a HELOAN provides a lump sum upfront with fixed monthly payments.
Contact our office for more clarification about the two equity products.
