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Large expenses like a home remodel, debt consolidation, student loans, or a new car can be intimidating. If you’re a homeowner who’s worked hard to build equity in your home, there are tools available to help you face these challenges head-on. 

By tapping into your home’s equity, you can secure a home equity loan or a revolving home equity line of credit (HELOC) that generally has a favorable interest rate and flexible terms. Not only are these great options for homeowners who have dreams of a new master suite, for example, but they’re also useful for parents who are about to start paying for their children to attend college — and they aren’t limited to home renovations. 

Home equity loans and HELOCs are both loans that utilize existing equity in your home, but they differ slightly from one another. With a home equity loan, you can borrow up to 95% of your home’s value in one lump sum and lock in a low, fixed interest rate for the entirety of the loan term. A HELOC, however, is a revolving line of credit with a variable rate that allows you to access your funds at any time over the draw period, for any amount up to your approved limit. 

To help decide whether a home equity loan or HELOC is right for you, it’s important to know your financing needs and whether your withdrawals will be ongoing over time, called the “draw period,” or in one lump sum upfront.  

If you need to pay for something in one lump sum and know precisely how much you need to borrow, such as for a large debt consolidation payment, a wedding, or a new car, a home equity loan may make the most sense. You’ll get all the funds you need at one time, then repay them over the agreed-upon term with a fixed rate.  

However, if your needs are more ongoing, like if you have several home renovation projects planned or tuition payments to make over several years, you may benefit more from a HELOC. The beauty of a HELOC is its flexibility — you borrow what you need when you need it during your draw period, and you only pay back the amount you use, plus interest. 

Ascend offers competitive rates and flexible terms on both home equity loans and HELOCs. We also have handy calculators that can help you determine how much of your home’s equity you can borrow and how much your payment will be. 

If you want to learn more about home equity lending or have questions, Ascend offers a free, interactive online financial education center that includes valuable worksheets, videos, and more information about a variety of topics. 

Trevor Williams is the chief lending officer for Ascend Federal Credit Union which Federally Insured by the NCUA. Ascend is an Equal Housing Lender. NMLS# 451452. All loans are subject to credit approval.