Will a HELOC or Home Equity Loan Be Better in June?

If you need to borrow money, you might consider tapping into your home equity. After all, the the average American homeowner has nearly $300,000 in net worth at their home. In turn, draw on your equity could provide you with the funds you need for various purposes. And if you’re considering borrowing against your home equity, you have several options, including Home Equity Lines of Credit (HELOC) And home equity loans. But while both options allow you to borrow money against your equity, there are important differences between the two.

HELOCs are variable rate lines of credit which allow you to borrow against the equity in your home (up to the HELOC limit) throughout the term. drawing period. This drawdown period usually lasts between five and ten years, during which you usually only have to make interest payments. At the end of the drawing period, your redemption period begins.

Home equity loans are fixed-rate loans that give you access to a lump sum loan. And, although you will immediately begin making payments toward your interest and principal balance, the interest rates and fixed payments on these loans means your rate won’t change over time. But which of these options is best in June?

Compare your home equity loan options now.

Will a HELOC or Home Equity Loan Be Better in June?

Here’s when a HELOC may be your best option and when a home equity loan may be the best choice.

When a HELOC Could Be Better in June

“If you think rates are going to go down, the HELOC would be a better choice if the loan is held until maturity,” says March Charnet, founder and CEO of American Prosperity Group, a financial planning company.

And that’s an important consideration. After all, if inflation continues to slow, as was the case in Aprilthe Fed could cut rates in the future, which could make a HELOC your best option come June.

But variable rates shouldn’t be your only consideration. With a HELOC, you will benefit from a draw period during which you can access financing multiple times up to the limit of your credit line.

So if you are unsure of the exact amount you need, a HELOC Could Be Your Best Option in June. If you choose a home equity loan and need more money in the future, you will usually need to apply for a new loan.

Tap into your equity with a HELOC now.

When a Home Equity Loan Could Be Better in June

Home equity loans come with fixed rates, so you’ll know exactly what your future payments will be, which can make planning expenses easier.

And “if rates were to rise, it is best to lock in a lower rate over the life of the loan and, therefore, the regular home equity loan would be the better choice,” says Charnet.

So, if you think interest rates might rise soon, a home equity loan might be the best option. And, with inflation persistently above the Federal Reserve’s 2% target, future rate increases are a real possibility.

Home equity loans may also be the best option if you already know exactly how much money you need since you are accessing a balloon loan. And since you can’t borrow against a line of credit with this option, you may not be tempted to tap more equity and borrow more money unnecessarily.

On the other hand, if you go the HELOC route, you might have access to more financing than you need, which could lead you to borrow money over and over again, resulting in higher payments .

Take advantage of your equity now with a home equity loan.

The essential

If you’re torn between a HELOC and a home equity loan in June, consider how these financial products can fit your goals and what you expect from the overall rate environment. If you’re expecting rates to drop, a variable rate HELOC might be the way to go. On the other hand, if you anticipate rates rising, a fixed-rate home equity loan might be your best option.

Your financing needs should also play a role in your decision. If you’re not sure how much you need, the flexibility offered by a HELOC can be helpful. On the other hand, if you know how much money you need, a home equity balloon loan could prevent you from borrowing for frivolous purposes. Compare your home equity loan options today.