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Home Equity Basics

What’s the difference between a home equity loan and home equity line of credit?

A home equity loan is a lump sum of money, received all at once to cover a large expense – like home improvement projects. Compare that to a home equity line of credit, which works more like a credit card.

When borrowing against your home equity, consider whether a continuing source of funds (home equity line of credit) or lump sum (home equity loan) will best help you achieve your goals.

What is equity in a home?

Home equity is the market value of a homeowner’s interest in their real estate property. It is calculated by determining the current fair market value of the home, minus the amount you owe toward its mortgage payment or other loans secured by the home.

Where do I access the home equity loan or home equity line of credit funds?

Loan funds will be deposited directly into the designated checking or savings account shortly after loan closing. Line of credit funds can be accessed through Commerce Online Banking transfers, with account checks, by calling our 24-hour information line (800-453-2265) or coming into a branch.

How can I use the home equity loan or home equity line of credit funds?

Use your loan or line of credit for whatever you need, such as home improvement, college tuition, debt consolidation. You can also pay off credit cards or other major expenses.

How long does it take to get a home equity loan or home equity line of credit?

Your Home Equity Specialist will walk you through the entire process and provide you with an approximate time to close and what you’ll need for a home equity loan or home equity line of credit

What is the difference between a home equity loan and a mortgage refinance?

Home Equity Loan: A home equity loan is a lump sum of money that you borrow against the equity in your home. Equity is the difference between the market value of your home and what you owe on any loans secured by the home, such as a mortgage loan. You can obtain a home equity loan using your home equity as security, generally without paying bank fees at closing. You can use that money to cover a large expense like home improvement projects.

Mortgage Refinance: A mortgage refinance loan pays off the remaining balance of your existing home loan and replaces it with a new mortgage loan. This is different from a home equity loan because it replaces your existing mortgage with another mortgage instead of being an additional lien on your home. You may refinance your home to borrow additional money for expenses or to receive a lower interest rate. Unlike a home equity loan, there are generally bank fees associated with refinancing.

For more information consult our home equity specialists.

Is the interest on a home equity loan or home equity line of credit tax deductible?

Consult your tax advisor for your unique situation, but the interest may be tax deductible.

What is the interest rate on a home equity loan or home equity line of credit?

A home equity loan offers a fixed rate, while the rate on a home equity line of credit is variable – or based on an index plus a margin.
See our current rates for a home equity loan or line of credit.

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