• Home Equity

Home Equity Loan vs HELOC: Which Is Best For You?

Katie Eckelman

Personal Banking Officer


Are you ready to tackle those home projects that you’ve been pushing off? Whether you’re planning a kitchen remodel or finally adding that new deck and patio — a Home Equity Loan or Home Equity Line of Credit (HELOC) might be right for you! Let us explain the difference.

Home Equity Loans

A home equity loan allows you to borrow cash against the equity in your home through the use of a second mortgage. Lenders will typically let you borrow up to 89.9% of your home’s value and you can use that lump sum of money for the improvements you’d like to make.

These loans are a closed-end loan that allows you to have a fixed interest rate with the same principal and interest payment each month. This allows you to take advantage of a long term, low-interest rate and fixed payments.

Home Equity Lines of Credit (HELOC)

HELOCs will also use your home as collateral through a second mortgage. You may be approved for an open-ended credit limit that will operate more like a credit card, allowing you to borrow and pay down principal repeatedly, up to your credit limit, as you need it to take care of your improvements.

As the borrower, you will only pay the interest due each month on the amount of the credit line that you use. These loans are typically a variable interest rate that is tied to a market index such as prime. Principal payments can be made in any amount over the loan term.

Which Option Is Right For You?

Although both options are a great way to get funds at a low cost, one may be better than the other for your situation. 

If you already know the cost of your project and are looking for a set monthly payment in order to pay it off with a scheduled time frame you may want to choose a Home Equity Loan

If you are unsure of the total costs you may have and are looking to spend as little as possible, a Home Equity Line of Credit would be the best option for you.

Ready To Get Started?

Excited to get started on those home improvement projects? We’re ready to help you take the first step! Reach out to us through the form below or give us a call. One of our home equity lenders will be in touch shortly.