Home Equity Loan vs.
Credit Line

A Home Equity Loan:
A second mortgage loan: This type of loan provides you with a fixed amount of money repayable over a fixed period. Generally the loan calls for equal payments that will pay off the entire loan within that fixed time.

A Home Equity Line of Credit
A home equity line is a form of revolving credit in which your home serves as collateral. Many homeowners prefer to use their credit line for items such as education and home improvements, not for day-to-day expenses. With a home equity line, you will be approved for a specific line of credit. That amount is the maximum you can borrow at any one time while you have the credit line.

Home equity plans typically include a fixed time during which you can borrow money, such as 10 years.

Once approved for a line of credit, you will typically be able to borrow up to your credit limit whenever you wish.

APR and Equity loans

• The APR for a traditional mortgage takes into account the interest rate charged plus points and other finance charges.
• The APR for a home equity line is based on the periodic interest rate alone. It does not include points or other charges.

View the Consumer Handbook on Adjustable-Rate Mortgages