Options to Tap Into Your Home's Equity

Homeowners have the opportunity to tap into their home’s equity to get some quick and easy cash. A WESTconsin Easy Equity Line of Credit, otherwise known as HELOC, and Closed-End Second Mortgage are two popular options. Which is best for you? See the details below so you can learn how to use your home’s equity effectively.

What are they?

Easy Equity Line of Credit: A revolving line of credit that allows homeowners to borrow against the equity in their home as needed. It functions similarly to a credit card, providing flexibility in accessing funds for various purposes like home improvements, education expenses, emergencies, or anything you need.

Closed-End Second Mortgage: A lump sum loan secured against the equity in your property. It's typically used for large, one-time expenses such as home renovations, debt consolidation, or major purchases.

How do they work?

An Easy Equity Line of Credit has a variable interest rate, meaning it may fluctuate based on market conditions. It is a revolving line of credit allowing borrowers to borrow, repay, and borrow again within the draw period, usually 5 to 10 years. Plus, you are only charged interest on the amount you actually use. Once the draw period is up, you repay the outstanding balance plus interest over a fixed term.

A Closed-End Second Mortgage operates on a 7-year Adjustable-Rate Mortgage. It has a fixed interest rate for the first seven years, providing predictability in monthly payments throughout the loan term. Borrowers receive the entire loan amount upfront and repay it over a period of 30 years.

Advantages

Easy Equity Line of Credit

• Flexibility: Borrowers have the freedom to use as needed, making it a great choice for ongoing or unpredictable expenses.
• Lower initial cost: You only pay back the amount you use and the accrued interest, meaning it is there for you as you need it.
• Tax benefits: In some circumstances, interest paid on the loan may be tax-deductible. Consult your tax professional for more information.

Closed-End Second Mortgage

• Predictable payments: Since the initial interest rate is locked in for the first seven years and subsequent adjustments have rate caps, it makes budgeting easier for borrowers.
• Ideal for one-time expenses: Suited for borrowers who need a lump sum for a specific purpose.
• Tax benefits: In some circumstances, interest paid on the loan may be tax-deductible. Consult your tax professional for more information.

WESTconsin is here to help!

Both Easy Equity Line of Credit and Closed-End Second Mortgage offer homeowners the opportunity to tap into their home equity for various financial needs. The choice between the two depends on individual circumstances, preferences, and the intended use of funds. Whether your mortgage is with WESTconsin or another financial, our local and knowledge Mortgage Loan Originators can help you make the right decision!