The difference between a Home Equity Line of Credit and Loan
A home equity line of credit resembles a credit card. It's a form of revolving credit that allows you to draw funds, up to a limit you set at closing, whenever you need it. Although there is generally a minimum payment due each month, you can pay off as much of the line as you want. If you're looking for a flexible solution to help you meet ongoing cash needs, such as tuition payments or medical bills, a home equity line of credit may really appeal to you.
With a home equity loan, you receive all your funds at closing, and pay a fixed amount each month over a predetermined period. If you need extra money for a specific, one-time event, such as traveling abroad or renovating your kitchen, a home equity loan may work for you.
Potential benefits
Many homeowners are drawn to home equity loans and lines because their interest rates can be lower than those of credit cards or conventional bank loans.
In addition, the interest you pay on a home equity loan or line is often tax deductible. We encourage you to consult a tax advisor about your particular situation.
Things to consider
Although home equity line of credit and home equity loan interest rates can be lower than those of conventional loans, they may be higher than what you’d pay for a first mortgage. With a home equity loan, you’ll choose between an adjustable rate that changes with the Prime rate, and a fixed rate that offers you a set monthly payment.
Home equity lines of credit tend to offer lower initial interest rates than home equity loans, but your rate and monthly payments will change, for better or worse, whenever the Prime rate fluctuates. You can use your funds as needed, and may qualify to repay as little as interest only each month. And with the Chase No Closing CostSM Option, you'll pay no closing costs.
Note: With the Chase Fixed-Rate LockSM Option, you can lock in a low rate for all or a portion of your line of credit. The interest rate is locked for the term you select. This gives you the security of a fixed-rate loan, along with all the flexibility of a home equity line. In addition, we have several different payment options (including an interest-only feature) so you can lock in the lowest possible monthly payments.
Which is best for you?
It depends on your financial goals. Use this table to help you compare and contrast home equity loans and lines so you can make an informed decision. Chase focuses on providing homeowners with innovative product features and industry-leading services.
| Home Equity Line of Credit (HELOC) | Home Equity Loan (HEL) | |
|---|---|---|
| What you get | A home equity line of credit is a revolving, variable-rate line of credit that uses your home as collateral. Because it is a line of credit, you can get the money you need when you need it. | A home equity loan is a fixed-rate loan with a fixed payment schedule based on the available equity in your home. You'll get your money all at once and then pay it back in predictable, fixed monthly payments. |
| How to qualify | You typically need to provide proof of your income, home ownership, your mortgage debt and how much equity you have in your home. An appraisal is used to determine the value of your home. | You typically need to provide proof of your income, home ownership, your mortgage debt and how much equity you have in your home. An appraisal is used to determine the value of your home. |
| Access to funds | You'll receive a checkbook and a Chase EquilineSM Platinum Visa® card which is accepted anywhere Visa is accepted. Or, you can access and manage your account online. | You'll receive the entire loan amount in a lump sum. |
| Costs and fees | Choose either the Chase Best RateSM Option or the Chase No Closing CostSM Option. | Choose either the Chase Best RateSM Option or the Chase No Closing CostSM Option. |
Fixed Rate Home Equity Loan
With a fixed rate home equity loan, the amount you pay each month toward principal and interest stays the same over the entire term. This protects you against rising interest rates. You'll get your money all at once and then pay it back in predictable, fixed monthly payments.
Variable Rate Home Equity Line of Credit
With a home equity line of credit the interest rate and payments are variable. The term is defined by a draw period and a repayment period. The payment each month is based upon the outstanding balance owed. As payments are applied to principal, your available credit increases accordingly.
Which is right for you?
Because interest rates and home financing programs change often, your choice should depend on:
- The interest rates and mortgage options available to you
- Your personal financial and investment goals
- Your borrowing needs
Your loan and line amount is based on your income, debts, home value, credit history and mortgage balance.
Interested in a home equity loan or line of credit? APPLY ONLINE NOW OR CALL 1-888-342-4273.
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