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Which home equity loan should you choose?

You’ve worked hard to pay your first mortgage balance down, and in turn that creates equity in your home. Simply put, the equity is the difference between your home’s value and the outstanding first mortgage balance. If you are considering a large home remodeling project, a second home, debt consolidation, or paying for college, you could use your home’s equity to finance your plans. What’s the difference between a home equity line of credit (HELOC) or a second mortgage?

A HELOC is similar to a credit card in that you have an available credit line you can access for many years.

  • You can borrow up to the available line of credit, pay it off, and still have it available to you if you need money again without applying for another loan.
  • The rate is often a variable rate tied to the prime rate, and the payments are based on a percentage of the outstanding balance, such as 1%.

A Second Mortgage has a fixed rate and term and can be used to pay for one thing at one time, similar to a car loan.

  • At Heritage, you can choose a fixed rate for up to 7 years.
  • It can be repaid over 15 years.

How do you choose?

A HELOC is best for:

  • Recurring expenses such as college or home remodeling, since you will need access to money over several months or years.
  • Establishing an emergency fund if you need money unexpectedly and quickly.

A second mortgage is best for:

  • A fixed purchase such as debt consolidation or a second home, or perhaps even a boat. You know how much you need, and don’t need to borrow from your home’s equity for many years.

Heritage’s loan officers are here to help if you have any questions deciding which is best for you and your financial goals.


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