Imagine your house is like a piggy bank. The money you've paid towards your mortgage and the value of your house itself is like the money inside. This is called 'equity'. You can borrow money using this equity, like getting a loan from your piggy bank!
There are two main ways to borrow: a HELOC (Home Equity Line of Credit) and a Home Equity Loan. A HELOC is like a credit card for your house – you can borrow what you need, when you need it. A Home Equity Loan gives you a big lump sum of money all at once.
- HELOC: Borrow as needed, variable interest rates (like a credit card).
- Home Equity Loan: Get a large sum upfront, fixed interest rates (like a regular loan).
| Feature | HELOC | Home Equity Loan |
|---|---|---|
| Money Received | As needed | Lump sum |
| Interest Rate | Variable | Fixed |
| Payment | Changes | Stays the same |
Both can be used for home repairs, but you need good credit and enough equity in your home to qualify. It's best to talk to a grown-up before borrowing against your home!
