Home Equity Line of Credit vs. Home Equity Loan

One of the most rewarding possessions you can have is owning your own home. With that comes the responsibility of maintaining repairs, making improvements, and, of course, making your mortgage payments. But did you know that by doing these things you are building home equity, an asset you can borrow against to fund things such as other home improvements, a vacation or car, wedding, college, debt consolidation—as long as you qualify, the options are limitless.

GettyImages-678025216Figure Out Your Home Equity

To figure out your home equity, take the assessed market value of your home and subtract the amount you owe on your mortgage.  For example, if your home is valued at $180,000 but you have $120,000 left to pay on your mortgage, your home equity would be $60,000. ($180,000 – $120,000 = $60,000).

Home Equity Options

Auburn Savings offers two options for how to use your home equity: Home Equity Line of Credit or Home Equity Loan. If you prefer the ability to continually access the funds, the Home Equity Line of Credit would work best for you. If you need to make one large purchase and don’t need the ability to reuse the funds, then a Home Equity Loan may be the better option.

Here’s a breakdown of the differences between our two options:

Home Equity Line of Credit

  • Open end line of credit with a 10-year draw period which gives you the ability to reuse the funds as you pay them back over the term of 10 years.
  • Flexibility of interest-only payments on the outstanding principal balance, but you can pay extra to the principal at any time.
  • Adjustable interest rate.

Home Equity Loan

  • You receive a check for one lump sum at the time of disbursement to use toward your choosing.
  • Fixed interest rate.
  • Fixed payment and term (length of loan),

Both a Home Equity Line of Credit or Home Equity Loan are great options for funding a special project or large purchase. Talk with an Auburn Savings Loan Specialist to see if you qualify and get started today.


Megan Moody

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