Home equity loans & lines

Choosing a lender for a home equity loan or line is a big decision. Compare what reputable lenders will offer you. Compare and contrast two different ways of borrowing against the equity in your home.

Home equity loan (Second mortgage)

• Provides a lump sum of money

  Your lender will provide a lump sum.

• Uses your home as security

  Your home secures the loan.

• Must pay back by certain date

  Your lender will specify a due date

• Often used for a project

  Home equity loans are often used for one specific purpose, for example, remodeling the house.

• Higher interest than first

  The interest rate on a second mortgage is usually higher than on a first mortgage. Different financial institutions may offer different rates. Shop around.

• Tax deductible interest

  Because these debts are secured by your home, part of the interest you’ll pay is often tax deductible, regardless of how you spend the money. Check with your tax advisor.

Home equity line of credit

• Provides revolving credit

  Provides revolving credit, a type of credit that allows an individual to borrow up to a certain amount of money, repay the money borrowed with interest when it is due, and then borrow the money again.

• Uses your home as security

  Your home secures the loan.

• Repayment options may vary

  Your lender will explain your repayment options

• Various uses

  Homeowners use their home equity lines of credit for a wide variety of purposes ranging from home improvements to college education.

• Interest rates vary

  Different financial institutions may offer different rates. Shop around. Some lines of credit have fixed interest rates; others have variable rates.

• Tax deductible interest

  Because these debts are secured by your home, part of the interest you’ll pay is often tax deductible, regardless of how you spend the money. Check with your tax advisor.