Home Equity Loan or Home Equity Line of Credit?

One of the best ways to rapidly build your real estate portfolio is to use the power of leverage. And if you own your primary residence, taking a loan based off of the equity can be immensely useful.

There are a few ways to utilize this strategy, and many of you have asked whether a home equity loan or a HELOC is a better strategy.

Home equity loans and home equity lines of credit are similar in that they both allow you to borrow against the amount of equity in your home. However, the two financial products have some main differences you’ll want to consider.

A home equity loan gives you access to one lump sum of money. This is a fairly traditional loan. The bank looks at the value of the home and gives you a loan in one amount.

A home equity line of credit, or HELOC, works a little differently. A HELOC is a revolving line of credit, meaning it works similarly to a credit card. A HELOC can typically be used for around ten years. It has a low introductory rate, and uses simple interest.

Personally, I like to employ the strategy of using a HELOC because it is repeatable and reusable! It can be used like a traditional checking account; you will even be issued a check card and a checkbook. You can learn more about using a HELOC as an investment tool here!