Home Equity Options
HELOC vs. Home Equity Loan
Home Equity Lines of Credit (HELOC) and Home Equity Loans are both types of home equity borrowing, with one major difference between them.
A HELOC is a revolving line of credit where the borrower can keep withdrawing money up to a pre-agreed credit limit, during the Draw Period. After the Draw Period, the balance is repaid (Repay Period).
A Home Equity Loan is a term loan where the lender pays the borrower a lump sum and the borrower must pay it back over the term of the loan.
- Calculate your existing equity (the current value of your home, minus what you owe) and decide how much you need to borrow.
- Gather the necessary documentation (such as W-2s, recent pay stubs, mortgage statement, home insurance policy) before you apply so the process will go smoothly.
- Read your disclosure documents carefully and ask the lender questions.
- Be aware that the underwriting process, though not as extensive as when you got your mortgage, can take weeks.
- Await loan closing, when you sign paperwork, and after the right of recission period, the loan funds or the line of credit becomes available.
| HELOC vs. HEL vs. Personal/Secured Loan | |||
| Description | HELOC | Home Equity Loan | Personal/Secured Loan |
| Rate Type | Tied to Prime (+/-) | Fixed or Adjustable Rate (ARM) | Fixed |
| Pricing Structure | Based on LTV and credit score | Based on LTV and credit score | Based on credit score |
| Payments | Interest only, due 15th | Principal & Interest, due 1st | Principal & Interest, you pick due date |
| Draw/Repay Period | Draw 10 yrs, Payback 10 yrs | Term up to 30 yrs* | Term up to 7yrs* |
| Grace Period | 15 days | 15 days | 10 days |
| Annual Fee | None | None | None |
| Pre-Pay Penalties | None | None | None |
| Closing Cost | Yes, up to $990** | Yes, up to $990** | $29.50 |
| Max LTV | 95% | 100% | 110% |
| * Subject to loan amount ** Request a loan estimate | |||
Home Loan questions? We're happy to help!
Call or text us at (920) 684-0361 in Manitowoc or (920) 451-8222 in Sheboygan or email us at homeloans@UnitedOne.org.
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