Need a Loan? Your Home Might Be Able to Help
If you are a homeowner and are considering taking out a traditional loan, you also may want to explore the benefits of a home equity loan or a home equity line of credit (HELOC). Both a home equity loan and a HELOC allow you to borrow money from the available equity built up in your home without jeopardizing the interest rate on your first mortgage. Funds can be used for a variety of reasons including home improvement projects, consolidating existing debt, college tuition, medical costs, or other large purchases.
While home equity loans and HELOCs are similar, they do have a key difference. With a home equity loan, you receive a lump sum of cash, which needs to be repaid over a set term. At SFB, you can choose a fixed or adjustable interest rate option. When you take out a HELOC, however, you are given a draw period where you can borrow as much as you need within the credit limit on a revolving line of credit for a predetermined amount of time. Once the draw period ends, a repayment period begins.
A mortgage banker will help you discover the best option for you and the amount available for you to borrow based on your home value, built-up equity, credit history, and other factors. With a lower interest rate than most loans, taking out a HELOC may be more cost-efficient for paying back funds over a longer period.