With the warm, summer air right around the corner, homeowners have begun cleaning up their yards with hopes of inviting friends and family over for cookouts. Their deck or patio becomes their most popular asset when it comes to enjoying the outdoors. Whether it was added or bought with the house, installing a deck or patio adds value to your home and has a notable return on investment. If you don’t have the upfront costs to make it happen, don’t worry. Use a home equity line of credit (HELOC) or a fixed rate second mortgage loan.

HELOC:

A home equity line of credit is a great option to:

• Make home improvements

• Pay for an emergency expense

• Pay down debt on other loans

The equity in your home is used to secure a revolving line of credit, with the available credit increasing as you make payments, like a credit card. A HELOC aligns with projects that require more flexibility in borrowing. You only pay interest on the amount borrowed. It has a variable interest rate, meaning your monthly payments could change based on rate fluctuations. Although rate amounts are out of your control, changing your payment amount is possible based on balance and debt paid in advance.

You must have equity in your home to qualify and can borrow any amount from a lender up to the agreed limit. Most lenders allow a line of credit up to 85% of your home equity.

Fixed interest rate:

If you are planning a project that has an upfront fixed expense amount and plan to pay the expense over a long period of time, a fixed interest rate is a more suitable option for a larger and longer-term investment. You’ll be protected from rising interest rates over the life of the loan; however, rates could fall below your fixed rate, resulting in you paying more than through a HELOC. It’s important to note that a lender can change your fixed rate under certain conditions. This could make it tricky if you choose to refinance from a HELOC to a fixed interest rate, or vice versa. Refinancing to a lower rate can be time-consuming with high closing costs.

Bottom Line:

Always consult with a financial professional before taking out a loan. Both a HELOC (variable interest rate) and fixed-rate loan have risks:

• Variable interest rate: unexpected rate fluctuations

• Fixed interest rate: Lender can change rate

If a HELOC makes sense for you, look at your budget and how much your finances would change if rates were to climb. If your comfort level aligns more with stability and consistency, move forward on a loan with a fixed interest rate. View your options and apply now!