Are Home Equity Loans (HEL) and Home Equity Lines of Credit (HELOC) the same thing?
No. Although both of these loans are of second mortgages, a HEL and a HELOC have some important differences. With a HEL, you receive a lump sum of money, while a HELOC works more like a line of credit. The interest rate on these loans also works differently. Second home mortgage generally have a fixed interest rate, but according to bankrate “almost always carry fees and closing costs, which many lenders do not generally charge for credit lines.” While home equity lines of credit may be free of some of these costly up-front fees, keep in mind that they are also variable rate loans, which means that the interest rate can change over time, according to the prime interest rate set by the Federal Reserve. When choosing between these loan types, ask yourself whether receiving your loan all at once or having access to a line of credit works better for you.
