Difference between Home Equity Loan and HELOC and Benefits of HELOC

Home Equity Loan: It helps the borrowers to take the loan against their share to the amount of stake they have in their home. You can borrow the loan at a competitive rate. The rate of interest will be fixed. This type of loan has a lower interest rate than other debt products. It is known as secured debt because borrowers know how much money they need. The home loan you will be borrowing will be on current market value.

HELOC or Home Equity Line of Credit: The home equity line of credit or HELOC is given to borrowers with a stake in their home. The homeowners can borrow the percentage difference of the equity, which can go up to 85% of the equity money. This debt loan is tied to your equity level and is a revolving debt.

Let us now check out the difference between a HELOC and a Home Equity Loan.

Difference Between HELOC and Home Equity Loan

·    Fixed Amount: Under a Home Equity Loan, you can borrow not more than 80% of equity as the loan. However, HELOC includes borrowing an open line of credit, which helps the borrower to borrow a fixed amount as required.

·    Conversion of Loan: You can convert some or all the parts of the loan into a fixed-rate loan under a home equity line of credit. The Home Equity Loan is already available on the fixed rate only.

·    Withdrawing the Money: Home Equity Loan allows you to get the money in a lump sum form. Under HELOC, you can borrow the money multiple times from the allotted maximum loan amount.

·    Return of Loan Amount: You must pay the remaining balance on your home equity line of credit like the normal loan. The repayment period will be close to 20 years. For a Home Equity Loan, you must pay the same amount every month until your home loan is fully paid.

·    Borrowing of Funds: When you have paid all the funds under HELOC, you can borrow the same amount again. Under a Home Equity Loan, the loan will not be extended or renewed. The line of credit and repayment will take up to 30 years.

What are the Benefits of HELOC?

1.    Lower Interest Rate: The home equity line of credit has a lower interest rate than personal loans, home loans, and credit cards. This loan type helps you to secure tens of thousands of dollars in the loan amount.

2.    Pay Interest for Borrowed Funds: You will only pay the amount for the borrowed funds. You can withdraw the funds for many years and use the funds the way you like.

3.    Flexibility: This fund offers a revolving line of credit, which means you can borrow the funds anytime during the preset limit period.

4.    Locking of Rate of Interest: The HELOC in Brampton offers a variable rate of interest. However, the borrowers can lock the portion of their credit line into the fixed interest rate.

If you are looking forward to HELOC loans in Mississauga and Brampton, contact The Mortgage Centre. You can borrow the loans fast and with utmost convenience.

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Location: 409 Matheson Blvd E, Mississauga, ON L4Z 2H2, Canada

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