Home Equity Blog

Home Equity: Line vs Loan

2021 Home Equity Blog
Date:  1/25/2021
Created by:  Vanessa Pesa & Stephanie Reusswig, of Berkshire Bank

Home Equity: Line vs Loan

When values rise in your neighborhood, your home’s equity may also increase. Using a home equity loan vs. a home equity line of credit (HELOC) may allow you to tap your home’s equity in cash.  Knowing the advantages of both products will help you choose the right type of financing for home improvement or other financial goals. Here's a few of the highlights to think on.

  • Vacations
  • Wedding expenses
  • Education
  • Debt consolidation
  • New vehicle or repairs to existing
  • Emergency fund 
As you see, a home equity is not just for a new roof or an update to a bathroom; these loans and lines of credit are a great tool for all of life’s exciting moments. Also, speak with your tax advisor regarding a potential tax write-off.

What exactly is equity? It’s the value of your home, minus the amount you currently owe on it (i.e., mortgage). With either a home equity loan or home equity line of credit (HELOC), Banks will let you borrow against your home equity up to a specified loan-to-value percentage. Besides, it can also be the percentage available even if your home is debt-free. But what exactly are home equity loans and lines of credit, and which product is best for you?

A home equity loan is a fixed amount of money paid back in fixed monthly payments at a fixed interest rate.  The bank provides the total approved funds at closing, similar to a mortgage. A home equity line of credit, on the other hand, is a revolving line of credit where the funds can be withdrawn and paid back throughout the draw period of the account.  This allows you to use the equity for short term projects and purchases without reapplying for a new loan each time funds are needed; you withdraw the funds from the available credit when you need them. Now that you have a foundation of knowledge on the subject go on down to your local Berkshire Bank branch and see what’s right for you! Your favorite banker will have all the specifics to help you consider which home equity option will best meet your personal financial needs.  Getting started with the process is simple; it begins with contacting your bank representative to help you submit your application for your choice of credit!  See you there!