By: Robert A. Vandenbergh

At some point in your life, you might need ready access to money for a major expense such as a home renovation or college tuition for your children. Many families who own their home have the option of applying for a Home Equity Line of Credit (HELOC) or a Home Equity Loan (HEL) to help with life’s expenses.



The video above, from Bankrate.com, does an effective job of explaining the basic differences between a HELOC and a HEL.

Borrowing against the equity in your home has become popular due to its lower interest rates and tax-deductible advantages (check with your tax advisor for details). A HELOC provides more flexibility than a HEL by allowing homeowners to withdraw cash on an as-needed basis rather than taking it in one lump sum.

 

Typically with a HELOC, lenders allow you to access your funds through a checkbook or an electronic transfer; whereas a home equity loan is a onetime transaction and you cannot increase the amount without a formal modification.

 

Lenders offer various programs and, before choosing one, here are some questions you should ask your financial advisor:

 

• What is the difference between a HELOC and a HEL?

• Will I be charged an application fee?

• Will applying for a HELOC affect my credit score?

• Will I have to pay an annual line of credit or participation fee?

• How will my HELOC credit line be determined?

• What is the initial interest rate and how will it change over the life of the loan?

• Will my interest be tax deductible?

• Will I have the option of converting to a fixed interest rate?

• Is a lifetime interest rate cap available?

• How can I access my HELOC?

• Does the home equity line of credit expire after a specified term, after which time full payment is required?

• Do I have to maintain a minimum balance?

• Will I be charged closing costs?

 

We would be happy to answer any questions you have about a HELOC. Simply call us at

866-224-1379 or visit any of our branch locations. For a limited time, we are offering a promotion on HELOCs that you can read more about on our website.