Under current law, the interest you pay on a home equity loan or HELOC is tax deductible only if the loan is secured by your main home or a second home and, as the Internal Revenue Service puts it, is "used to buy, build, or substantially improve the residence." However, that law i...
Another important difference between a home equity loan vs. a line of credit is the interest rate. Home equity loans typically offer flat (fixed) interest rates, meaning the rate is locked in for the term of the loan. HELOCS, on the other hand, typically offer adjustable interest rat...
Fixed interest rate makes payments easier to predict No limit on what funds can be used for Interest is tax-deductible if used for home repairs or renovations Cons Typically need at least 15%-20% home equity Approval time is considerably longer than HELOC or personal loan Application fees, clo...
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When deciding between a home equity loan vs. HELOC, you’ll want to know the basic distinctions between these personal financing options to find the one that will work best for you.
In the HELOC-vs.-home-equity-loan debate, it's crucial to understand how each works — before you put your house on the line.
A home equity loan comes as a lump sum of cash, often with a fixed interest rate. A home equity line of credit (HELOC) is a revolving source of funds, much like a credit card, that you can access as you choose. HELOCs and Home Equity Loans: The Basics Home equity loans and HELO...
HELOC Home Equity Loan Type of Credit Revolving line of credit. Lump sum loan. Interest Rate Usually variable and can fluctuate over time. Fixed, remains constant throughout the loan term. Repayment Model Flexible during draw period, then fixed repayments. ...
You don’t mind a variable interest rate:The interest rate on HELOCs fluctuates, which means the rate could rise. Only consider a HELOC if you’re able to handle that. “In a rate-cut environment, a HELOC can initially present lower monthly payments due to its variable nature, though bor...
As of January 24, 2025, average national home equity loan rates are: Average overall rate:8.45% 10-year fixed home equity loan:8.57% 15-year fixed home equity loan:8.53% The average HELOC rate nationwide is 8.28% as of January 24, 2025. ...