What is equity? It is the difference between the value of your home and your mortgage balance.
What are the types of home equity
loans?
There are two categories of home equity loans: standard (traditional) home equity loan and a home equity line of credit.
What is the difference?
With standard home equity loans, you pay back the money in monthly payments. Monthly payments are fixed, because the interest rate on the loan is fixed too.
With home equity lines of credit the bank offers a credit card for purchases or a specially issued checks. The interest is paid only on the amount actually borrowed.
Home equity line of credit has a variable interest rate, however, a fixed rate can be negotiated.
