Two Ways to Leverage Your Home's Equity

Smart Solutions • July 2014

Are you looking for ways to finance an upcoming major purchase or other expense? Maybe you're thinking about home improvements, planning a wedding or consolidating debt. Whatever your need, the equity in your home may provide a perfect solution.

Today, as many lenders have tightened their borrowing criteria, using your home's equity can be one of the smartest ways to get the funds you need. Plus, interest rates are typically lower than those of credit cards or conventional loans and may be tax deductible.* Read on for insights to help you decide if a home equity loan or line of credit may be the right choice for you.

Home Equity Loan

• What is it?
A home equity loan gives you funds one time in a lump sum. The amount you qualify to borrow is based on a percentage of your home's value (the value minus your primary mortgage debt equals your home equity). Your interest rate and monthly payment are fixed for the life of the loan. You begin repaying the loan immediately, and the set payment includes the principal plus the interest charged on the full amount borrowed.
• The benefits:
You enjoy peace of mind — knowing your payments won't change and knowing you have a specified number of payments with a set end date.
• Best for:
If you’re borrowing for a single expense, like a kitchen remodel or a wedding, this may be the right option for you.

Home Equity Line of Credit (HELOC)

• What is it?
A HELOC is a revolving line of credit, similar to a credit card. You can use the money at your discretion, up to a predetermined limit, by writing a check or transferring funds. You repay the debt in monthly payments that can range from the minimum due to the full balance. You accrue interest only on the funds you use, regardless of your loan limit. Rates are typically variable.
• The benefits:
A HELOC offers the flexibility and convenience of ongoing credit — you can access any amount within the pre-approved limit and it’s available when you need it.
• Best for:
This option may be better suited for ongoing expenses, such as college tuition or medical and dental bills. It can also be a good choice if you want a financial safety net that can be accessed quickly and easily.

Interested in learning more?


  • Consult your tax professional regarding the deductibility of interest.
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