Home Equity Line or Loan?

I am looking into getting a home equity line or loan, for home improvements. I cannot decide which is better-- the equity line, or the loan? The equity line rates are lower (4% at my CU, adjusted monthly based on the Prime Rate published in the Wall Street Journal, min=4%, Max=18%). The variable rate makes me nervous--My problem is, with the economy the way it is, I don't know how long such low equity line rates would last-- it seems they would last a while, but I don't have the best understanding of these things. The equity loan rates are also decent (6.25%), and fixed. I plan to borrow around 70,000, probably for at least a 20-year payback period.

Can anyone give me any advice on which way to go with this?
Thanks,
Mel

Here is a good resource i found on web about the difference of home equity line or loan and it s advantages and disadvantages.
http://www.lendingtree.com/home-equity-loans/advice/choosing-a-loan/equity-loan-vs-line-of-credit/

Home equity loans facilitates the owner of the home to borrow by vowing the house as guarantee. Home equity loan attracts those borrowers who want to borrow huge amount of money by guarantying their house.

From the viewpoint of lenders, they are more liberal because they consider Home Equity Loans as safer one. Because no one can either disappear along with the house or hide it during defaulting the loan. In fact, one would wish to make payments in priority if the house is on loan.

Lenders may be more liberal because they view home equity loans as relatively safe. You can’t disappear with your house or hide it if you default on your loan, so the lender has a good chance of collecting the debts. Also, you are likely to make your payments a priority if your home is on the line.

The advantages of home equity loans and are: it has low interest rate, it is easy to qualify for home equity loans, payments made on a home equity loan may be considered as tax deductible, large amount of loan can be taken by borrowers with this type of loan.

Mel,

If you are looking at a 20 year repayment period, there is a lot of risk going with a variable rate. No one can definitively predict rates, but it's pretty hard to imagine that rates will stay at these historic lows for another 20 years. Some people don't mind risk (hence the financial mess we're in right now), so it really depends on your own willingness for risk. If you do go with the floating line of credit, I'd recommend having a back up plan for the medium term once rates do begin to rise.

Tom

I was about to post the same kind of question, though my situation is slightly different.

We are looking to borrow about $15,000 for a kitchen remodel and are trying to decide between a HELOC (prime + 1.50% - currently 4.75% at my bank Citizens Bank) or a 10 year home equity loan at about 8.00%.

I like the idea of a fixed rate with a fixed payment, but at the same time I do like the interest savings the current HELOC rate would provide, but am concerned about the fluctuating rate. Even if we did the HELOC, we'd still try to pay it off in 10 years as we don't like having non-mortgage debt.

Anyone care to crystal ball the prime rate over the next 10 years? What is the chance of the prime rate getting up to 6.50% or higher, which when the 1.50% is added to it, would make it the same rate as the home equity loan?

Thanks,

Mark

With a HELOC, you are constantly faced with the prospect of, use it or lose it. The lender can suspend your line of credit any time they feel that there has been a significant decline in your collateral value, whatever significant means.

If you need the HELOC funds all at once up front, then there is no danger of losing it. However, if you are planning to use and repay funds over the period of draw (say 10 years), the danger of losing the line of credit is very significant. If this is your plan, I would suggest drawing the full amount up front and putting it in the bank or other investment, so they can’t take it away from you. This is a very creepy aspect of HELOCS that not everybody understands.

Here is a good resource i found on web about the difference of home equity line or loan and it s advantages and disadvantages.
http://www.lendingtree.com/home-equity-loans/advice/choosing-a-loan/equity-loan-vs-line-of-credit/

Yes, above given link will help you.