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When venturing into the real estate industry, many things must be considered. However, very few things are more important than learning about your funding options. No matter if you are searching for resources to enable potential buyers to more easily afford your properties or if you are a buyer who needs help securing the best financing possible, taking time to explore your options can save you time and money. For instance, bridge loans and HELOC loans are two similar options that enable buyers and sellers to secure the funds needed to make various real estate deals. With that in mind, here is a closer look at how these two funding methods compare to each other and how Hard Money Lenders California can help.
An HELOC loan is a financial product that allows people to utilize their home’s equity as a means of establishing a line of credit. Once you have been approved, your financial institution will extend a line of credit that allows you to withdraw the total sum of the credit line, pay it back, and withdraw it again while using the equity in your home as collateral.
Many people gravitate towards HELOC loans because they offer very competitive interest rates, which are usually adjustable rate loans, and often with no closing costs. They can also be used in a similar manner as bridge loans for homeowners attempting to purchase a new home. However, they are only granted to those who are considered creditworthy and who have at least 20% equity in their current residences.
When comparing HELOC loans and bridge loans, there are several key differences. They are as follows:
- HELOC loans are cheaper than bridge loans.
- HELOC loans also offer the possibility of tax deductions on interest payments made on the loan.
- There is no requirement to repay the amount withdrawn for an HELOC loan during the draw period.
- You can make multiple withdrawals up until you reach the value of an HELOC loan; bridge loans are distributed in one lump sum.
- Customers must begin repaying bridge loans immediately, while HELOCs can begin being repaid in as much as ten years after the loan has been disbursed.