Which is Right for You?

At Cal Coast Credit Union, we understand that navigating the world of home financing can be a bit overwhelming. That's why we're here to help clarify the differences between two popular options: the Home Equity Loan and the Home Equity Line of Credit (HELOC). Knowing which one is right for you can make a big difference in achieving your financial goals.

Home Equity Loan: The Lump Sum Option

A Home Equity Loan is often referred to as a second mortgage. It allows you to borrow a fixed amount of money against the equity you've built up in your home. Here are some key features:

  • Lump Sum Payment: You receive the entire loan amount upfront, which can be ideal for large, one-time expenses like home renovations or debt consolidation.
  • Fixed Interest Rate: The interest rate is set at the beginning and remains constant throughout the life of the loan, making your monthly payments predictable and easy to budget for.
  • Fixed Repayment Term: You repay the loan over a set period, for example: 10 years, 15 years, or 20 years.

This option is great if you prefer the stability of fixed payments and know exactly how much money you need. You can learn more here.

HELOC: The Flexible Credit Line

A Home Equity Line of Credit (HELOC) works more like a credit card. Instead of receiving a lump sum, you get a revolving line of credit that you can draw from as needed. Here’s what you need to know:

  • Revolving Credit: You can borrow, repay, and borrow again up to your credit limit during the draw period. At Cal Coast, the draw period lasts 10 years, followed by a repayment period of 15 years.
  • Variable Interest Rate: The interest rate can fluctuate based on market conditions, which means your payments may vary.
  • Flexible Terms: You can benefit from lower minimum payments thanks to interest-only repayment during the draw period.

A HELOC is ideal if you need access to funds over time and want the flexibility to borrow as needed. Find out more here.

Keep Your Low Mortgage Rate

Accessing your home equity through a HELOC or Home Equity Loan can be a smart financial move, especially if you already have a low first mortgage rate. By choosing a HELOC or second mortgage, you can tap into the value of your home without altering the favorable terms of your existing mortgage. This means you continue to benefit from your low interest rate while gaining the flexibility to use your home’s equity for various needs, such as home improvements, debt consolidation, or unexpected expenses.

Making the Right Choice

Choosing between a Home Equity Loan and a HELOC depends on your financial situation and needs. If you have a specific, large expense and prefer predictable payments, a Home Equity Loan might be the best fit. On the other hand, if you need ongoing access to funds and can handle variable payments, a HELOC could be more suitable.

At Cal Coast Credit Union, we're here to help you make the best decision for your financial future. Contact our team if you have any questions.

For more detailed information about the home equity options Cal Coast offers, you can visit our Home Equity page.