“Hi Gary. My wife and I want to buy an investment property. We want to conserve our cash, so we plan to borrow against our home. Can you tell us the difference between a home equity line, an equity loan, and a HELOC?”
A home equity LINE (aka HELOC, acronym for “Home Equity Line Of Credit”) is an open line of credit against your home. The balance goes up and down as you borrow and repay the funds. The line can be open with a zero balance.
A home equity LOAN is simply a first, second, third (etc., but hopefully not!) mortgage that starts at a set amount. You take all the money at once. It typically must be repaid monthly, and once it’s paid in full the loan is paid off and done.
Home equity loans usually are taken out for a specific purpose: remodel, debt consolidation, investment, etc. Home equity lines may be taken out for similar reasons or as a way of having rainy day money available if needed in the future.