Watching Your Wallet: Home equity vs. HELOC
LANSING, Mich. (WILX) - House values are on the rise, which means home equity is too. If you’re planning a home improvement project, that equity could help with the bill.
Now is a great time if you’re looking at pulling equity from your house to refinance. A home equity loan is a set amount of money, usually for a set amount of time with a set amount of interest.
Cherry Dale, a financial coach with the Virginia Credit Union, said the repayment term is usually a fix period from five to 20 years.
“If you’re a person who really likes to plan and know exactly what your payments are going to be and what your interest rate is going to be, a home equity might be more for you,” Dale said.
The interest rate on this type of loan is also much lower than you would get from a credit card because your home is the collateral. If you default, your house is in jeopardy. Dale said a HELOC, or home equity line of credit, has a variable interest rate.
“But the interest being variable means it could go up and down, based upon what is happening in the market,” Dale said. “Right now, the interest rates are quite low.”
But the interest could increase in a few years, depending on what the market does.
You’re usually locked into a time frame for a HELOC and at the end of that time, you owe whatever is left, so it can look like a balloon payment in the end.
More: Watching Your Wallet
Copyright 2022 WILX. All rights reserved.
Subscribe to our News 10 newsletter and receive the latest local news and weather straight to your email every morning.