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Using Your Home Equity: Loan Vs Line Of Credit

March 15, 2022

Home equity loan or line of credit (HELOC) — which one’s right for you?

Thinking about making some home improvements this fall — or planning ahead so you’re first in line with your contractors next spring? Then you’re probably on the lookout for affordable financing. One option that could be a good fit: tapping into the equity of your home. 

What is home equity financing?

Your home’s equity is the difference between what your home is worth and any debts you have against it (like a mortgage). If you made a big down payment or your home’s value has gone up since you bought it, you might have a fair amount of equity built up. Home equity lending gives you a way to tap into part of this money. It can be relatively easy to qualify for these loans — because your house will serve as collateral — the interest rates are often lower than for other personal loans.
Home equity financing comes in two options: 

1. Home equity loan

You’ll borrow a set amount of money at a fixed interest rate and for a set amount of time. In short, it’s very similar to any other type of lump sum loan.
  • ADVANTAGES: These loans are easy to budget for: You know the amount of your monthly payment and the length of your loan upfront. And a fixed-rate loan could save you money if rates go up over the life of your loan.
  • DISADVANTAGES: Repayment terms are typically less flexible, which could make a difference if your financial condition changes. And if your project ends up costing more than you borrowed, you would need to reapply for a new loan.
A good fit for home improvements with a fixed price tag, like window replacements or a roof repair.

2. Home equity line of credit (heloc)

This gives you access to a pool of money, but you won’t be charged interest or have to make payments until you actually borrow against it.
  • ADVANTAGES: Flexibility is the biggest benefit. You only borrow the amount you need, when you need it, and you won’t make payments until you start borrowing. Payment terms tend to be more flexible: you might be able to make interest-only payments and you might have an adjustable interest rate on the money you borrow. At Summit, you also have an option to lock your balance into a low, fixed-rate for more predictable payments on a set timeline.
  • DISADVANTAGES: It can be harder to build this into your budget as the amount you’ve borrowed could change from month to month. You could also face higher interest payments with adjustable rate loans.
A good fit for a project where the total cost is harder to nail down, like a bathroom remodel, or if you’d like to tackle more than one project. Having access to a line of credit means you won’t have to apply for a new loan each time you need money (as long as it doesn’t exceed the amount of your line, of course!). And no matter which Summit product you choose, you’ll get low rates and no annual fees or prepayment penalties. Want to investigate tapping into the value of your home? with Summit lending expert today! You might also be interested in Financial success isn’t how much money you have — it’s feeling good about what you’re doing with the money you have. An easier, more affordable way to buy, build or refinance a home A house is one of the biggest purchases you’ll probably ever make. Which means you really (really!) want to be sure you’re getting the home loan that’s right for you, and that just might be a 15/15 Adjustable-Rate Mortgage (ARM)! But first, let’s look at some helpful background, starting with the two main categories of mortgages – fixed-rate and adjustable-rate. Home equity loan or line of credit (HELOC) — which one’s right for you? Thinking about making some home improvements this fall — or planning ahead so you’re first in line with your contractors next spring? Then you’re probably on the lookout for affordable financing. One option that could be a good fit: tapping into the equity of your home. Navigating finances after college is hard, but you can take it one lesson at a time. Get tips for managing money and paying off student debt after graduation. Navigating finances after college is hard, but you can take it one lesson at a time. Get tips for managing money and paying off student debt after graduation. Sometimes having a little extra cash is the only thing between you and your dreams. Check out these financial tips to be smart about borrowing money and avoid common mistakes. Buying your first home can be intimidating, so we asked real people to share their new homeowner tips. Find out their strategies to ace the homebuying process. Buying a car is a big purchase, but if you play your cards right, you can get a good deal. Learn how to save money at every step of the car buying process. Yes, it’s possible to create the home of your dreams, and it may be easier than you think with a home equity loan. But how does it work? Get up to speed with these tips from our very own Kim Sponem. Buying a car is a big deal — hey, those things are expensive! And even if picking out a vehicle is one of your most favorite things ever, it can still be a bit stressful to navigate researching and buying a car. Summit’s got three tips to help make the process as fast and easy as possible. Featured Products Certificates Checking Accounts Home Equity Loans Home Loans Business Banking Certificates Checking Accounts Home Equity Loans Home Loans Business Banking Financial Education Upcoming Events Programs Tools & Calculators On-demand Webinars Podcasts Upcoming Events Programs Tools & Calculators On-demand Webinars Podcasts About Equity in Money™ About Summit Careers News Community Giving Equity in Money™ About Summit Careers News Community Giving Help & Support Contact Us Member Support Center Schedule an Appointment Find a Branch Contact Us Member Support Center Schedule an Appointment Find a Branch Please read the following before proceeding to: The website you are about to visit is solely the responsibility of the merchant or other party providing the site. The content of this third-party site, including materials and information, is solely the responsibility of the provider of the site. The Credit Union is not responsible for any such third-party content. Any transactions that you enter into with a vendor, merchant or other party that you access through this third-party site are solely between you and that vendor, merchant or other party. The Credit Union does not endorse the content contained in this third-party site, nor the organization publishing the site, and hereby disclaims any responsibility for such content. The Credit Union Privacy Policy does not apply to this third-party site, and for further information you should consult the privacy disclosures of the third-party site. NCUA Insurance Estimator Privacy, Security & Accessibility Rates, Fees, Terms & Disclosures Routing Number *  The Wisconsin's #1 Mortgage Lender designation is based on the number of loans in 2022, gathered from the Home Mortgage Disclosure Act data compiled annually by the Consumer Financial Protection Bureau. The results of the data were obtained through the LEI: 254900NTAC4H10MGSU23 **  SBA Lender of the Year Award for Credit Unions as awarded by the Small Business Administration of Wisconsin in 2023. Copyright 2024 © Summit Credit Union. All rights reserved. If you are using a screen reader and are having problems using this website, please call 608-243-5000 for assistance. Insured by NCUA