Home Equity Loans 101

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You may have heard the term HELOC or HELOAN floating around, but do you know what they really are? A Home Equity Line of Credit, also known as a HELOC, is a specific type of loan that acts similarly to a credit card. It is a revolving line of credit that you can take out, using the equity that you have put into your home's value. The line of credit is based on a percentage of the value of your home. The more your home is worth, the larger the line of credit. 

A Home Equity Loan, also known as a HELOAN, is a specific type of loan that allows you to borrow against the equity you have built in your home's value. Unlike a HELOC, which works like a credit card, a HELOAN provides you with a lump sum of money upfront that you repay over a set period with fixed monthly payments. This makes it a good option for one-time expenses, such as home renovations, debt consolidation, or other large purchases. 

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Before you get started with an application, make sure you look at your current finances, a rough estimate of the value of your home, your credit score, and your needs. You can utilize our HELOC calculator to determine if that is the right fit for you and your family.  

 

Predictable Payments or Flexible Access to Funds? 

Choosing between a HELOC and a home equity loan often comes down to how you plan to use the money. A HELOAN gives you a fixed amount upfront and typically comes with consistent monthly payments, making it a good option when you know exactly how much you need to borrow. A HELOC on the other hand, functions as a revolving line of credit. Instead of receiving all your funds at once, you can borrow as needed, up to your approved limit. This flexibility can be useful for projects with costs that may change over time, though monthly payments can fluctuate if the interest rate is variable. 

 

Requirements for a Home Equity Loan 

HELOCs and HELOANs share many of the same approval criteria because both use your home as collateral. 

Common qualifications: 

  • Available home equity: The amount of equity you've built in your home may affect your eligibility and how much you can borrow. 

  • Credit score: Lenders may review your credit profile as part of the application process. 

  • Debt-to-income (DTI) ratio: Your income and existing debt may be considered to determine whether you can comfortably take on additional payments. 

Because the loan is secured by your home, applicants may also need to complete a home appraisal or valuation as part of the approval process. In many cases, obtaining a HELOC or home equity loan takes longer than unsecured financing due to the additional underwriting and property review requirements 

Click here to start your application for a HELOC or a HELOAN.  

 

 




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