HELOC vs Fixed Rate Home Equity Loan: What’s the Difference?

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If you own a home, you might be able to use its value to get money when you need it. Two common ways to do this are a HELOC (Home Equity Line of Credit) and a Fixed Rate Home Equity Loan. Both are useful, but they work in different ways. Let’s break it down.

What Is a HELOC?

A HELOC (Home Equity Line of Credit) is like a credit card for your house. You can borrow money when you need it, up to a certain limit, then, you pay it back. With this option, you can borrow again if needed.

Here’s what you should know:

• Interest Rates Can Change: The amount of interest you pay may go up or down over time.
• Interest-Only Payments at First: At the beginning, you might only pay the interest. Later, you’ll start paying back the full amount you borrowed.
• Great for Ongoing Needs: You can borrow only what you need when you need it—perfect for projects or unexpected costs.

What Is a Fixed Rate Home Equity Loan?

A Fixed Rate Home Equity Loan is different. You borrow a set amount of money all at once and pay it back in regular, equal payments every month.

Here’s what to know:

• Fixed Payments: Your payment stays the same every month. That makes it easier to plan your budget.
• One-Time Use: You get all the money at once, so it’s best for large one-time costs like home repairs, buying a car, or paying off other debt.
• Steady Interest Rate: The interest rate doesn’t change, so you know exactly how much you’ll pay in total.

Which One Should You Pick?

It depends on what you need the money for and how you like to pay it back. Here’s a simple guide:

Choose a HELOC if:

• You want to borrow money a little at a time.
• You’re okay with payments that might go up or down.
• You have ongoing projects or surprise expenses.

Choose a Fixed Rate Loan if:

• You need a big amount all at once.
• You want a steady, easy-to-plan monthly payment.
• You’re paying for something with a clear cost.

Final Thoughts

Both options can be great ways to use the value in your home to reach your goals. A HELOC gives you more flexibility. A Fixed Rate Loan gives you more predictability. Think about what works best for your life and your budget.

Want to get started? Visit www.MaineSavings.com to talk with a local lender and explore your options today.