Difference Between Home Equity Line And Home Equity Loan

Now that the Wall Street Journal Prime rate is lowered to 7.5 percent, home owners can take advantage of the lower rates if they wanted to borrow money from the Equity in their homes. The Big Question Consumers have to ask themselves is wether to get a home equity loan or a home equity line of Credit.

Home Equity Loan:

Payments are fixed.
Money is given in a lump sum.
With Home Equity Loan Payments includes Principle and Interest.
Monthly Payments are usually Higher

Home Equity Line of Credit:

Payments are Variable.
You pay interest only on the portion you use.
Payments are usually interest only for a few Years.
Monthly payments are usually lower.

To Qualify for the Equity loan and The Equity Line of Credit you need to have Employemnt, Credit History and a acceptable loan to value.

Employment is used because a lender will need to feel secured that you can pay for the loan or line of credit. Credit history is also important becuase every one needs credit to apply for loans a good credit rating shows your credibility to repay debts. The Loan to Value is important it determines how much credit a Financial Institution will lend. The loan to value is the ratio between what you owe on your house and what it's worth. Financial Institutions approve lines and loans which are usually with 80 percent loan to value. Example if you owe $40000.00 on a house worth $100000.00 your loan to value would be 40 percent.