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Novem05
LIF Adolescent
Member since 3/06 677 total posts
Name:
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HELOC vs Home Equity Loan
We're starting to do an addition to our home, and just wanted to know the difference. Which one do you think is better,advantages-disadvantages? TIA
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Posted 4/25/08 9:10 AM  |
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bicosi
life is a carousel
Member since 7/07 14956 total posts
Name:
M
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Re: HELOC vs Home Equity Loan
HELOC is like a CC. you can use it up, pay it down and it'll still be available. Only catch is that the rate is variable.
With a Home Equity Loan, it's like any other loan. You pay it off and it's no longer available. Just done. Only thing is that you can lock in on a rate.
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| Posted 4/25/08 9:13 AM |
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mycrayon1
LIF Toddler
Member since 10/07 438 total posts
Name:
Carolyn
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Re: HELOC vs Home Equity Loan
Posted by bicosi
HELOC is like a CC. you can use it up, pay it down and it'll still be available. Only catch is that the rate is variable.
With a Home Equity Loan, it's like any other loan. You pay it off and it's no longer available. Just done. Only thing is that you can lock in on a rate.
This is a good way to look at it.
The ones we offer at my job are simliar. The biggest thing is the HELOC for the 1st ten years your min payment is interest only so while the payment is smaller and only based on what you used your not really getting anywhere if you don't make any princple payments. The nice thing is as you pay down the principle it becomes available again.
A Loan is more like a vehicle loan, theres a difinitive beginning and end, you know excatly what each payment will be each month, plus it is interest and principle.
The thing to think about when choosing one over the other is: How long are you going to be in the house? Can you afford to make extra payments? What are you doing with the proceeds? A peice of advice my mom gave me to remember that once you paint a room the rug looks dingy so be careful its a domino effect, change the roof the siding looks icky get new siding the windows look old, etc.
HTH
ETA: The HELOC rate is usually based on prime so while its low it can go up a lot if prime starts to go back up
Message edited 4/25/2008 6:47:40 PM.
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| Posted 4/25/08 6:47 PM |
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KLSbear
LIF Adult
Member since 1/06 1908 total posts
Name:
Karen
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Re: HELOC vs Home Equity Loan
We just got a HELOC and they told us that the rates are better on those than a Home Equity Loan right now.
We have the option to convert the amount used on the HELOC to a fixed rate loan at any time if rates start rising enough to make it worth it. No charge for the first conversion, and $50 each incident if we convert additional amounts. Seems to me that's the best of both worlds as you can play the rates to your advantage.
Also, on a HELOC you don't begin paying until you use it whereas if you get the regular loan you're paying immediately. We're looking at the HELOC as back up for anything we can't finance out of savings and paychecks so it's to our advantage that we're not paying immediately on a loan.
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| Posted 4/26/08 11:22 AM |
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Erica
LIF Adult
Member since 5/05 11767 total posts
Name:
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Re: HELOC vs Home Equity Loan
HELOC's variable rates would make me nervous, but I have read that in a downward economy, it's good to have a HELOC available, in case you lose your job or you need emergency money, when banks won't give you a loan
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| Posted 4/26/08 11:41 AM |
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KLSbear
LIF Adult
Member since 1/06 1908 total posts
Name:
Karen
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Re: HELOC vs Home Equity Loan
Posted by Erica
HELOC's variable rates would make me nervous, but I have read that in a downward economy, it's good to have a HELOC available, in case you lose your job or you need emergency money, when banks won't give you a loan
We were a bit nervous about the variable rate too, but the option to move to a fixed rate lets us have some control there. I had heard the same too about having it available for emergencies too and that's sort of our thinking - fund the renovations from savings and let the HELOC be the emergency cushion instead of taking the HELOC first while retaining savings.
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| Posted 4/26/08 11:49 AM |
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ave1024
I Took The Wrong Road
Member since 12/07 6153 total posts
Name:
That Led To The Wrong Tendencies
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Re: HELOC vs Home Equity Loan
Posted by Erica
HELOC's variable rates would make me nervous, but I have read that in a downward economy, it's good to have a HELOC available, in case you lose your job or you need emergency money, when banks won't give you a loan
Yes it's great to have an emergency fund. And while the rate is variable, I don't think HELOC rates will be going up anytime soon. That would require the FED to raise the prime rate a number of times and I really don't see that happening.
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| Posted 4/26/08 2:59 PM |
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