Borrowing Against Your Home Equity: Weighing your Options

There are times that come up when we need money. The bathroom remodel is well overdue, your daughter is getting married, and your other children are heading for college. Whatever the situation may be, borrowing money against the equity of your house might be a good way to go.

Home equity lines of credit* (HELOC) and Home equity loans** (or second mortgages) are two options to consider and can possibly have a lower interest rate than a credit card or personal loan. Let’s look at their similarities and differences.

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Home Equity Loan/

Second Mortgage

HELOC

Home is used as collateral                  

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Closing costs* (average $250- $550, but $0 with promotion through 5/31/2022

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Limits are based on Loan to Value (LTV) and owner-occupied status

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Money can be obtained as needed over a

period of time (like a credit card)

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Money received in a lump sum

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Rate is variable and may change over time

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Fixed rate

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When it comes to making a decision between the two, there are a few questions to ask yourself:

  1. Do I need a large sum of money now (i.e. wedding, a large remodeling project, high interest credit card pay-off)?
  2. Will I need money at regular intervals over time (i.e. college tuition, slowly updating my house)?

If you answered yes to #1, you will benefit most from a home equity loan/second mortgage. If #2 sounds more like your situation, you might consider a HELOC.

It’s very important to keep in mind that your house is collateral, which means if you default on your payment, there is a risk of losing your home. When you pay your high interest credit cards off with your home equity loan be careful not to run them up again, if you do you could be putting your home in jeopardy.

  Biggest tip: Make sure that you only take out what is within your means to repay.

If a home equity loan/second mortgage or HELOC sounds like a fit for your needs, contact Firefighters & Company Federal Credit Union at 937-228-1614 or apply online at ffcocu.org today. We can help you decide which option is best for you.