What are the key differences between a Home Equity Line of Credit (HELOC) and a Home Equity Loan?

A home equity loan is a type of mortgage that allows you to borrow against the value of your home. Like other loans, which are distributed in one lump sum, the repayment term for a home equity loan is set on a specific amortization term and payments are made as monthly installments of both principal and interest.

Meanwhile, a Home Equity Line of Credit (HELOC) is also a type of mortgage that provides access to funds on an ongoing basis by allowing you to draw from your available credit line over several years. The draw period typically consists of 5 to 10 years and payments usually consist of monthly interest only payments based on your average loan balance from the prior month. During this period, borrowers can make minimum payments or pay down and re-borrow from the line of credit.

Both home equity loans and HELOCs can be excellent financing options for larger purchases or projects, allowing borrowers to use the value of their properties as collateral against future payments. If you’re interested in leveraging your property’s equity, it's important to compare loan products to find which one offers the best terms for your needs. Consider researching interest rates, repayment periods, fees and other factors before making a decision. With careful research and consideration, home equity loans and HELOCs can be a great way to access funds while taking advantage of the equity already built up in your home.