Heartland Bank and Trust offers two options to help you access your home’s equity:

How Home Equity Loans Work

A home equity loan uses that “untapped” value as collateral, which means your interest rate is often lower than it would be on an unsecured or personal loan.

Generally, home equity loans are the second mortgage, but it can also be a first mortgage. One of the biggest advantages of a home equity loan is that the interest you pay is often tax deductible. Be sure to consult a tax advisor to find out if you’re eligible.

A home equity loan comes as one amount, and there’s a fixed monthly payment plan. Payments start right away and continue until the balance is paid in full. They come with competitive fixed interest rates, a variety of terms, and minimal closing costs, which all work together to make the loan more affordable than others.

How Lines of Credit Work

A home equity line of credit (HELOC) is similar to a home equity loan in that the funds are available immediately. Instead of receiving the money as a single deposit into your account, the value of your loan lives as a line of approved credit you can draw from as expenses arise. You only pay interest when you use some of the line of credit, and as you pay back what you used, your line of credit “refills” until you have access to more funds again. You control a line of credit for borrowing against the equity in your home

This is probably easier to understand in an example.

Let’s say you establish a $15,000 home equity line of credit, and you write two checks from your HELOC for a total of $2,500. You’ll still have $12,500 available to use, and you’ll only pay interest on the $2,500 you “borrowed” by writing the check. It’s basically the bank saying we believe in you and your good money sense to manage a loan however you need it, when you need it.

HELOCs come with minimal closing costs and no annual fees, which makes them a great option for using your home’s equity.

Advantages of a Home Equity Line of Credit: