You asked: What is the difference between a home equity loan and a home equity line of credit
We matched that to: What is the difference between a home equity loan and a home equity line of credit?
It can be confusing, since both the home equity loan and the home equity line of credit use your home as collateral. Plus, both are sometimes referred to as a second mortgage, because they are secured by your property, just like your original (first) mortgage.
A home equity loan, sometimes called a term loan, supplies you with a fixed amount of money, payable over a fixed time period, typically with a fixed interest rate. You make the same payments each month. Once you receive the money, you cannot obtain additional money from the loan.
A home equity line of credit (HELOC) works differently. You are allowed to borrow funds up to your credit limit at any time during a time frame, called the draw period. If the principal is paid during the draw period, the money automatically becomes available for you to use again. You don't have to spend all the money either; you can withdraw money as it's needed.
In most cases, credit lines have a variable interest rate that fluctuates over the life of the line. Some banks, including TD Bank, are now offering a fixed rate option on some lines of credit.
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