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Home equity loan is a one-time loan made by lender against the equity in borrower’s home. Typically, such loans have shorter term and are paid in a lump sum. You can consider taking home equity loan to pay off your existing debts, fund home improvements, etc. On the other side, in home equity line of credit, lender approves applicant for a maximum credit limit on the basis of the value of his home. The lender could also adjust or change the credit line based on modifications in the value of home. Thus, HELOC usually operates much like a credit card.
Moreover, home equity loans could be made available as fixed rate loan as well as adjustable rate loan. In fixed rate home equity loan, interest rate remains the same throughout the life of the loan. But in adjustable rate loan, rates remain same initially and then may adjust based on changes done in market index. Interest rates for home equity line of credit are variable and change based on the prevailing prime rates. Depending on your financial situation, you should be able to figure out which option will serve you better. In home equity loan where rates are fixed, you can plan your budget well and not be made surprised by higher payments. On the other side, interest rates for home equity line of credit keep changing which may or may not be in your favor. To make sure you choose the right option, it is better to take help of a knowledgeable mortgage specialist.
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The mortgage specialist who has a long experience in the industry will not only make you understand what home equity loan and home equity line of credit is but he will also explain to you how to calculate home equity line of credit rate, how to qualify for home equity loan or home equity line of credit, what documentation is needed to make the process quicker and simpler, what it takes to qualify for lower interest rates for home equity line of credit or home equity loan, etc. You could also be able to reduce hassles, rigors and unexpected troubles involved in application and approval process of the mortgage with specialist’s assistance. Such competent specialists are usually hired by online mortgage service provider firms.