How Home Equity Financing Compares With Other Lending Options
Find out how home equity loans and lines of credit compare as financing options to personal loans, a cash-out mortgage refinance and credit cards.
Factors to consider when you want to borrow money
When trying to determine what financing option is best for you, it's important to consider a variety of factors as each individual circumstance is different. The answers to these questions will help guide your focus as you identify the lending solution that's right for you.
How much do you need to borrow?
How quickly do you need access to funds?
Do you own your home?
If you own your home, how long do you plan to live there?
How close are you to paying off your current mortgage?
Are there promotional lending offers you can take advantage of?
A new credit card can be a fast way to obtain funding with many card issuers providing instant-approval and quick access to the credit line
Credit cards may have higher interest rates than other lending options—try looking for card promotions offering lower rates
The card's credit limit should be considered as it may not be high enough to cover large expenses, such as a vehicle purchase, education or major home renovation
A home equity loan (HELOAN) and home equity line of credit (HELOC) both let you to leverage the equity you've built in your home to cover a variety of expenses
A HELOAN can be used to cover expenses with fixed costs, and typically has a lower interest rate than an option like a personal loan as it is secured by your home
With a HELOC, you can draw funds as you need them and only repay what you use—just like a credit card
Home equity financing can be a good option for many homeowners and usually takes upwards of 30 days before you receive cash
Home equity lending resources
Articles, tools and videos to help you explore your home equity lending options.
If you own a home, you may have built up equity, which is the home’s value, minus what you owe on it.
Your equity can increase when your home’s value increases. It can also increase as you pay down your mortgage principal, which is the amount you borrowed. You can tap into some of this equity to get the things on your wish list.
Maybe you want to add value to your home by making home improvements. Or maybe you want to pay for large purchases like a car, or buy a second home as a vacation or rental property or prepare for major life events like a wedding or a child’s education expenses.
TD Bank does not offer closed-end loans (i.e. Home Equity Loans) for the purpose of post-secondary (college) education financing.
You might also want an emergency fund, or to consolidate higher-interest debts so you can pay them off faster.
You can do this with a Home Equity Line of Credit or a Home Equity Loan.
For both the financing is secured by your home, so your interest rate may be lower than other types of loans.
So, which one’s right for you?
With a HELOC, you take money as you need it, up to your credit limit. It’s a good choice if you’re not sure exactly how much you need, or if your borrowing needs might change over time.
With a HELOAN, you get a lump sum amount all at once, so it’s a good choice when you know how much you need.
When it’s time to repay a HELOC, you’re responsible for repaying only the portion you’ve borrowed plus interest. That saves you money because you don't pay interest on the portion you don't use.
A HELOC has a variable interest rate, which means it could go up or down. But it’s typically the lowest rate available. With a HELOC, your payment amounts may vary.
For the first 10 years, you’re only required to make interest payments, though you can also repay principal if you'd like. Any principal that you do repay can be borrowed again.
If you have a balance at the end of 10 years, you have another 20 years to repay the remaining principal with interest. You can no longer borrow from the line of credit during this time.
With a HELOAN, you have a fixed interest rate and you choose the repayment term, ranging from 5 to 30 years. It’s easy to budget because your monthly payment will always be the same.
To sum up, you could say a HELOC is more flexible, while a HELOAN is more predictable.
So, if you think a HELOC or a HELOAN is right for you, apply now!
Member FDIC TD Bank, N.A. Loans subject to credit approval. Equal Housing Lender. TD Bank does not offer closed-end loans (i.e. Home Equity Loans) for the purpose of post-secondary (college) education financing.
Thanks for thinking of TD Bank for your home loan!
Applying can be quick and easy.
We’ll start with basic information, like where you’ve lived, your contact info, and why you want the loan.
Then we’ll ask about your employment history and income.
Lastly, we’ll ask about assets and liabilities.
It helps to have things like pay stubs and account statements handy.
Try to answer every question. If you’re not sure about an answer — or if you’re applying with someone else and don’t have all of their information — just give us your best estimate. We can update it later for you.
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And, if you have any questions or problems, just give us a call!
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