Smart Home Refi

The definition of a home equity line of credit, also known as a HELOC, is a loan that allows you to borrow against the equity of your home. A HELOC provides flexibility, because unlike borrowing and paying interest on one large lump sum, you decide how much you need and pay interest only on what you use. A home equity line of credit typically offers a lower interest rate than other loan products.

A home equity loan is defined as a specific one-time lump sum loan with fixed monthly payments. Home equity loans are commonly used by borrowers to cover major expenses, such as home remodeling, or to consolidate debt. To secure a home equity loan from a lending institution, you as the borrower use your home as collateral. A home equity loan can be borrowed from a lender before or after you pay off the mortgage. To qualify, the property must hold equity, which determines the minimum and maximum loan amounts available.

• With a home equity loan, you can apply for the precise amount you want to borrow. Your loan will be calculated based on your home’s equity.
• You’ll receive a fixed interest rate that doesn’t change throughout the life of your loan.
• After you’re approved for a home equity loan, you’ll receive a single lump-sum distribution without the option to obtain additional funds.

• HELOCs offer a revolving source of funds that you can borrow from as often as needed, as long as you don’t exceed the credit limit.
• You can draw as much or as little money as you need from your HELOC, and you’ll only pay interest on the money you use. 
• Similar to a credit card, HELOC funds become instantly available for use again as the money borrowed is repaid.
• HELOCs often include a variable interest rate that may fluctuate over the life of the loan.

1. Credit line equity access checks or credit card: You may access funds via credit line equity access checks or credit card transactions. The transaction must use the equity access checks or card associated with your HELOC.
2. Online: Simply log in to your online banking account and easily transfer money from your HELOC directly into your checking or savings account.
3. Telephone request, request by mail or in-person request: Customers may call the bank, mail a request to the bank or go into a branch to request available HELOC funds be transferred into their checking or savings account.

Loan to value (LTV) is a ratio comparing the amount of money a homeowner owes on his/her first mortgage versus the home’s current appraised value. Borrowers with higher LTVs usually pay a higher rate of interest because they are generally considered a greater risk of default than those with comparatively lower LTVs.

LTV is typically calculated as:

LTV  =  Mortgage Amount / Appraised Property Value

• Home improvements (remodeling a room or replacing an HVAC)
• Debt consolidation (credit cards, loans, medical bills)
• College tuition and expenses 
• New car 
• Car refinance
• Recreational vehicles (boats, motorcycles, ATVs)
• Vacations (airfare, hotel, expenses)
• Unexpected expenses (medical bills, new furnace

This can be confusing to most because both Home Equity Loans and Home Equity Lines of Credit share some similarities, such as:

• Both loans are secured by the equity the borrower owns in his/her home.
• Both loans may be referred to as a second mortgage.
• Both loans’ interest may be tax-deductible (consult your tax adviser).

Home Equity Loan

• A fixed amount of money based on your home’s equity.
• A fixed rate of interest over a fixed amount of time.
• Single lump-sum distribution of the money with no option for the borrower to obtain additional funds.

Home Equity Line of Credit

• A revolving credit limit based on your home’s equity.
• The option to draw money at any time as well as multiple times, over a predefined time period.
• The ability to draw money in any increments.
• As soon as the principal is paid, the funds are instantly available for use again.
• A variable rate of interest that may fluctuate over the life of the loan.

A home equity line of credit (often called HELOC and pronounced Hee-lock) is a loan in which the lender agrees to lend a maximum amount within an agreed period (called a term), where the collateral is the borrower's equity in his/her house (akin to a second mortgage).

 A home equity line of credit works more like a credit card. You are allowed to borrow up to a certain amount for the life of the loan -- a time limit set by the lender. During that time you can withdraw money as you need it. As you pay off the principal, your credit revolves and you can use it again.