Home Equity Line or Loan? It’s Your Call.

shutterstock_221080195-home equityby Vince Liuzzi
Executive Vice President and Chief Banking Officer, DNB First


It happens the moment you decide to become a homeowner; you’re flooded with a series of questions and decisions. What type of home are you looking for? Where do you want to live? What mortgage term should you choose? Unfortunately, the questions don’t cease once you become an actual homeowner.

That’s also true when you make the decision to borrow from the equity in your home and apply for home equity credit. From the start, you’ll be asked to make one very important decision:

Do you want a home equity line of credit or a home equity loan?

Know your home equity options.

Before you decide, it’s important to understand the difference. A home equity line is actually a revolving line of credit that works very much like a credit card. You borrow what you need over time and only pay interest on the money you use. As you repay the money you owe, it becomes available to you again. The important thing to remember is that the interest rate you’re charged is variable, so the amount you owe can change each month.

A home equity loan is different in that you’ll receive the funds in a lump sum. Another key difference is that the interest rate on a home equity loan is set for a fixed term. You’ll pay the same amount each month for the entire term of the loan, making budgeting easier.

Finding the right home equity solution for you.

Which choice is best? The answer, of course, depends on you. Or more specifically, the reason you need to borrow. If you need to borrow to make a one-time purchase – to consolidate debt or purchase a car– a home equity loan could be a better choice. If you want the flexibility to borrow over time to pay for ongoing expenses, such as college tuition bills, you could choose a home equity line.

Choose your lender carefully.

Home equity rates vary by lender, so be sure to shop for competitive rates. At DNB First, we’re currently offering special low rates on both lines and loans, but they’re only available for a limited time. To learn more, visit our website or stop by your nearest branch for a consultation with your banker, who can help you make you the right choice.

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