Is a Home Equity loan right for you?
Spring is a great time to work on home repairs, put in a pool for the family to enjoy this summer, plan that dream vacation, or even consolidate leftover holiday debt and high-rate credit cards. A home equity loan can be a great option to finance any of these.
Using the available equity in your home as collateral for a loan gives you a low rate of interest and flexibility. There are two types of home equity loans–a closed-end loan and a home equity line of credit.
When planning a vacation, doing home improvements, or repairs, a home equity line of credit is a great choice. Often with improvements, you’re paying as you go along–paying contractors, buying supplies, etc. If you’ve ever done home improvements or repairs, you’ve likely come across additional expenses that were unexpected. The benefit of a line of credit is that you draw funds as needed and only pay interest on what you use. If you make payments reducing the principal balance, that increases what is available for you to continue to use. It’s a revolving line of credit, similar to a credit card, and you are only responsible for paying what is borrowed. Often, consumers will even open a home equity line of credit to have access to cash in case of emergencies. The payment on this loan type can vary from month to month as it’s usually a percentage of the outstanding principal balance, plus accrued interest.
A closed-end home equity loan is a perfect product for either a single, large purchase (like an automobile or recreational vehicle) or for consolidating debt into a single payment with a lower rate. The funds are dispersed in a lump sum and monthly payments are made for a specific term until the loan is paid back in full. Because this is a closed-end loan, you will know exactly what your payment is each month.
When deciding on a home equity loan, you’ll want to research the interest rates. Most banks will offer both fixed and variable rates. You’ll also want to inquire about fees, including closing costs, whether an appraisal is required, annual fees, and early termination fees.
For questions regarding Home Equity loans, visit our website at westgate.bank or stop by our Bellevue location at 1004 Cornhusker Road.
