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A home equity loan allows a homeowner to get a secured loan that utilizes the equity in his/her home as collateral. This loan can be either a fixed rate mortgage or an adjustable rate mortgage.
A home equity line of credit uses the homeowner’s home as security for a revolving line of credit. The credit limit is determined by taking a percentage of the home’s appraised value and deducting from that the remainder owed on the mortgage. This line of credit can be used when and how the homeowner pleases. In addition, the interest rate on HELOC’s is relatively low.
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