Not sure whether a home equity loan or a home equity line of credit (HELOC) is right for you? Chad Abernathy, Senior Vice President and Regional Lending Manager, and Mike Krueger, Consumer and HELOC Credit Manager, break down the differences between home equity loans and HELOCs.
What are home equity loans and HELOCs?
According to Chad Abernathy, there are two ways to tap into the equity of your home. With a home equity loan, you receive the money you are borrowing in a lump sum payment and you usually have a fixed interest rate with a fixed monthly payment until the loan is paid in full. With a HELOC, you have the ability to borrow or draw money multiple times from an available maximum amount, similar to the way a credit card works.
What are the differences between a home equity loan and a HELOC?
Home equity loans include the following features:
• Provide a lump sum of cash in one payment
• Fully amortizing and repaid in fixed, monthly payments
• Ideal for large, one-time expenses
HELOCs, meanwhile, differ in the following ways:
• Establishes an approved amount and allows customers to access the funds whenever needed
• Amount owed is based on the outstanding balance; payment amount may change from month to month
• Available line of credit can be replenished
• Ideal for ongoing expenses
How can a home equity loan or HELOC help me? What are some benefits?
Both Krueger and Abernathy agree: “Home improvement projects are the most popular reason to take advantage of a home equity loan or HELOC. Other reasons may include debt consolidation or life events requiring large financial commitments, such as vacations, weddings, education, and more.”
Why should customers choose First Mid for home equity loans and HELOCs?
Abernathy says, “The local, knowledgable staff at First Mid is here to assist you at all times. The First Mid HELOC is a transparent product. While we do not have teaser or introductory rates and we do charge nominal closing costs to establish the line, we do not have any hidden fees. Our rates and fees are transparent — we do not have any early payoff or non-usage fees. We make a 20-year commitment with each line we close. Most HELOCs offered in the marketplace balloon at maturity, meaning once the loan matures, the balance on the line at that time is due. With First Mid, that is not the case. The first 10 years of the HELOC, the loan is a drawable line of credit with monthly payments of interest only. The second 10 years is a repayment period of fully amortized payments to repay the borrowed balance.”
How does someone apply for a home equity loan or HELOC?
Call our Mortgage Center toll free at 1-877-888-5629 or visit us online to find a location near you. You can also visit any of our local branches and ask for a mortgage lender.
Need help securing a home equity loan or HELOC? Trust the experienced team of experts at First Mid. Contact us today.
*Subject to IRS rules and regulations. See your tax advisor for details. Home Equity Loans and HELOCs limited to owner occupied residences and subject to credit approval. Property insurance is required. Fair market value is based upon an acceptable current valuation report.