There are three popular types of home equity loans for you to choose from:
Home Equity Loan
This is essentially a second mortgage.
- Once the loan closes, you get paid one lump sum.
- You pay it back with monthly installments, with interest.
Home Equity Line of Credit (HELOC)
This option is a revolving credit line, operating like a credit card, with the limit being determined by your home equity.
- There is a draw period in which you withdraw funds from the lender up to the amount you’re approved for.
- This is followed by a repayment period, where you make monthly payments with interest.
This method involves refinancing your mortgage. Your new mortgage will include the original amount you borrowed plus the new amount you’ll receive in cash, hence the name.
- This results in one new mortgage payment, encompassing both your original mortgage amount and the new cash you borrowed.