Loans Answers

HELOCs

Question: Where have you been for the last two years??? A typical HELOC is priced at Prime rate, which is currently at 4%. There are also plenty of HELOCs at Prime minus 0.5% making them far cheaper than most mortgages. Home equity loans are a different animal altogether and should not be compared to HELOCs.

Answer: While HELOCs were at Prime, ARMs were as low as 3.5% around here.

HELOCs and HE Loans are not that different. Most financial firms that offer them do so pretty much in parallel. While payout and repayment terms are different, each of them is essentially a “second mortgage” (for the typical consumer who takes one out in addition to an existing mortgage). Both of them place liens on your house, both carry tax-deductible interest, and both are subordinate to any existing mortgage.

For the consumer trying to decide whether a HELOC or HE loan is better for his individual situation, they certainly MUST be compared! The consumer with a specific amount and purpose of loan in mind will likely find a HE Loan more suited, while the consumer looking for a replacement for, or supplement to, an expensive credit card will likely choose the HELOC.

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Filed under: Home Equity Loan