Both mortgages and home equity lines of credit are different financial arrangements you can use to help pay off your home and other expenses. They work differently, but can be used in conjunction with one another.
Home Mortgage – Quick Facts
Typically the initial loans you take out on your home is from a banking institution.
A lump sum of money is taken out and paid back in installments, with interest.
Refinancing your original mortgage is sometimes a better decision vs. having two mortgages.
Home Equity Line of Credit – Quick Facts
With a home equity line of credit, collateral for the loan is the equity in your home.
The bank approves a certain amount based on the value of the home.
Often times, a variable interest rate is used in accordance with market conditions.
Each month, you will only pay the interest.
With a home equity line of credit, take out only the money you need to use, which reduces the amount of interest you need to pay.
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