Home Equity Loans

When you plan to use the equity in your home to get access to capital, there are several choices. Here's a quick break down of those options:

Mortgage: Different types exist, but you must pay closing costs and have a fixed payment over time.

Equity Loan: Smaller closing costs, but essentially a stripped down mortgage.

Line of Credit: The two listed above were installment loans (principal + interest payments on an amortized schedule). Lines of credit are like a low interest credit card (revolving credit) against the equity in your home. Payments are often interest only and do not attack the principal during the "draw" period (the period when the loan functions like a revolving account --- a credit card-like loan). Once the draw period ends, the remaining balance converts into an installment loan like those mentioned above.

One other key factor to consider other than down payments and terms is the fundamental struggle between fixed rate and variable rate. For example, the fed rate jumped .75 % between November 2015 and April 2017 so if your variable rate was 3.50%, you'd currently be at 4.25%. Not a huge deal in my opinion, but if we're headed into an environment like the early 1980's where rates got up to 10% and higher...then that's a big scary monster you'd be staring down the barrel of.