What is best home equity loan
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
