HELOC Vs Home Equity Loan: Which is Better?

HELOC Vs Home Equity Loan: Which is Better?

hey what's going on everyone this is Sam
Kwak one of the Kwak Brothers, real estate investor and entrepreneur and in this
video I'm gonna go and break down what are the main differences between a home
equity line of credit versus a home equity loan which is better which one
should you get we're gonna break it down now before I do be sure to go and
subscribe to the YouTube channel as well as hit the bio icon so that you get
notified in our future videos I'm gonna go and say right out of bat that home
equity loan and hold my equity line of credit are not the same thing and a lot
of time there are misconception that people sort of interchange the
terminology including Dave Ramsey so I'm gonna go and break down what are the
differences and let's go and start with you home equity loan a home equity loan
is amortized and what that basically means is that you have a set number of
years that you have to pay that loan off completely and a lot of times the home
equity loan payoff period can vary anywhere between five to thirty years so
if you have a five year amortized home equity loan whatever amount that you
borrowed you gotta have to pay it off in five years and many times you pay a
fixed monthly payment every single month until you hit zero on that balance the
monthly payment will consist of the principle amount and the interest amount
on that loan the other thing about home equity loan is that it's closed and it
basically means is that you get the entire loan amount upfront and when you
make your monthly payments to your home equity loan you can't get your principal
mountian back whereas a home equity line of credit which I'm gonna go and explain
further you can reuse that money whenever you make a payment against the
home equity line of credit so with the home equity loan you get all the money
upfront you make monthly payments to it pretty much like a mortgage and you
can't reuse the money that you pay into the home equity loan with your home
equity loan a lot of time at second position basically what that means is
that a lot of individuals that use a home equity loan or borrow using a home
equity loan they already have an existing mortgage that's well into being
paid off or they're halfway there and they're just getting another loan on top
of their existing loan mortgage and that is known as second position alone and
I'm personally not a big fan of a home equity loan for obvious reason it just
adds more debt you get all the money upfront and a lot of times people are
using it for rehab and making upgrades or remodeling their home which can or
cannot be good it really depends on the situation but generally I'm not a big
fan of a home equity loan because it takes away the flexibility as well as
some liquidity and I'm gonna share with you guys what that means now let's go on
that home equity line of credit side the main thing when it comes to a HELOC is
that it's not amortized although it can be but the way that we're going to show
you how to use a HELOC it's not gonna be amortized keylock uses what's called the
average daily balance a lot of people like to use a lingo simple interest the
way that the interest is calculated on a HELOC is bit different than your home
equity loan some may argue it's the same I like to argue it's different because
your balance on your home equity line of credit can change pretty much on a daily
basis speaking of daily basis it is revolving
meaning you can pay back whatever the balance that you've incurred on your
HELOC and reuse any principal portion of the heal on let's say you had $10,000
balance on your key lock you made a $5,000 principle payment you can go and
reuse that $5,000 that you put in on the HELOC so it's revolving it's kind of
like a credit card with the HELOC it can be second position or it can also be
first position so what that basically means is that you can get a HELOC a home
equity line of credit on top of your existing mortgage but you can also
replace your existing mortgage with a first position he lost all that you owe
basically is a HELOC which can give you a lot of flexibility
so a home equity line of credit is definitely not the same thing as a home
equity loan two different loan products they do different things I love using
the home equity line of credit because again you can pay back reuse pay back
and reuse and a lot of applications such as using the home equity line of credit
to go and buy rental properties creating more income creating more passive income
cash flow of course I don't condone using any of these either loan products
to go on a Vegas trip or buy a new car or buy a vacation home I don't condone
any of that which I think Dave guys like Ramzi we agree but I do like using these
tools these types of loan tools to go and acquire income producing assets
which could help you make more money could increase your income could
increase your your personal net worth so you could do a lot of beautiful things
if you as long as you use it the right way now can you do some damage with the
HELOC yes you can you can do things with the HELOC that could put you in a very
tough situation could get you in some trouble so make sure you get some
education and knowledge behind using a home equity line of credit because
obviously you can do some damage if you're abusing it right it just like
anything use the home equity line of credit wisely and I hope this gives you
guys a better understanding of the difference between a he loan versus a
home equity line and credit the next video that I definitely recommend that
recommend that you guys watch is how to pay off your mortgage within five to
seven years and that videos right here click on it it's right there I you know
you don't have to go anywhere click on that video and watch how you can save up
to two-thirds of your time and your money by using our unique strategy and
it's going to be lots of a cool thing so going to flea check that out and I'll
see you guys in that video

dave ramsey

As found on YouTube

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