Home Equity Loan (Forbrukslån) vs. Home Equity Line of Credit

Home equity loans and home equity lines of credit use your household as collateral, but you should still use them to prevent getting expensive and high-interest loans. A HELOC is a line of credit that will allow you to borrow the money you need based on the variable interest rate. […]

Home equity loans and home equity lines of credit use your household as collateral, but you should still use them to prevent getting expensive and high-interest loans. A HELOC is a line of credit that will allow you to borrow the money you need based on the variable interest rate.

On the other hand, a home equity loan is a lump sum you must disburse upfront and pay back in fixed monthly installments. Both options will allow you to tap the eighty-five percent of your equity, meaning the value of your property minus the outstanding mortgage balance.

You should check here to learn everything about variable interest rates and factors that may affect them.

These options feature low-interest rates and perfect terms since you will use your property as a guarantee. Still, before you make up your mind, we recommend you shop around and find the option with the lowest expenses and fees.

How to Boost Home Equity?

Since home equity is a difference between your household’s current market value and mortgage balance, you can increase it by following specific steps and circumstances:

  • Mortgage Payments – The best way to boost your home’s equity is by reducing the outstanding balance on your mortgage. The more you pay your installments, the more you will reduce the balance, which means you will increase overall equity. At the same time, you can make extra mortgage principal payments to boost equity faster than regular.
  • Home Improvements Will Boost the Property Value – Although your principal may remain the same, boosting the value of your property will help you increase the overall equity you can use. Remember specific renovations will add more value than others, so you should conduct comprehensive research before starting a renovation project. Your main goal should be boosting the equity.
  • Property Value Increases – In some situations, the property value will rise as time passes. We are talking about appreciation, another way to increase overall equity passively. Since the property increase in value depends on numerous factors, including the economy, location, and many more, it is challenging to determine when the appreciation will happen. Still, when you check out the historical data of households in your area, you can gain insight into home price trends in the last few decades.
  • Significant Down Payment – When you place a significant down payment, you can boost overall equity. For instance, adding twenty percent instead of ten percent will offer you a higher amount. You can tap into it faster than choosing a lower down payment, which is vital to remember.

How to Calculate Home Equity?

The most critical measure lending institutions will use to determine whether you can tap the equity is the loan-to-value ratio or LTV. When applying for an equity loan, the equation will compare the amount you wish to get to the property’s value.

At the same time, LTV depends on the outstanding balance, meaning it will affect whether you will get private mortgage insurance or not. If you wish to determine the LTV ratio, we recommend dividing the current loan balance and finding the number on the online account or monthly statement by the appraisal amount.

The essential aspect of getting accurate LTV ratio is professional appraisal. Your lender will arrange a qualified expert to assess your worth. Afterward, you should multiply the number by a hundred to convert it into a percentage.

We are talking about the most accurate way of determining the value, but you can use specific online tools to get an estimation. Still, it is way better to find a professional to prevent potential issues from happening.

What is a Home Equity Line of Credit (HELOC)?

A HELOC or home equity line of credit is a revolving credit that acts similarly to a credit card. It means you can borrow a specific amount of your equity and repay it over time, depending on terms and other factors.

HELOCs will allow you to access money when you need to repay it, but with an adjustable interest rate, you should pay interest on the funds you access, which is vital to remember. s. That is why you will not get fixed monthly installments, which is a perfect option for people who do not know how much they need to borrow.


  • Potential tax deduction for improvement projects
  • Flexible repayment
  • It does not come with additional fees
  • You can borrow the amount you need


  • Revolving credit is challenging to control, meaning you can easily overspend
  • The adjustable interest rate depends on market rates and fluctuation
  • You can lose your household in case of default

Suppose you wish to achieve the flexibility to borrow as much money as you need in a specific period. In that case, you should choose HELOC as the best course of action. It is an excellent solution for people who are unsure about the amount they need for a specific venture or project.

What is a Home Equity Loan?

When it comes to a home equity loan, you should know that it is a secured option that will allow you to tap the value with a fixed rate and monthly installments. Generally, the interest rate depends on your credit score, loan amount, payment history, and overall income.

The best thing about it is the flexibility you will get with the lump sum. You can use it for anything you want. Therefore, when you boost your credit score after getting it, you can later refinance to achieve better rates and terms.

Some people use it for renovations or repairs, such as remodeling a kitchen, adding a new room, updating a bathroom, or reroofing. Remember that you can get a tax deduction when you invest in home remodeling. You can take it with a low, fixed-rate to handle significant debt, which is a vital factor to remember.


  • Get a lump sum you can use for anything you want
  • Fixed interest rates mean you will get predictable monthly installment
  • Tax-deductible loan interest
  • Some options do not come with additional expenses


  • You must have at least 670 FICO points and higher
  • It would be best if you had significant equity to qualify
  • If the property value declines, it means you will owe more than your home’s worth
  • Defaulting means, you will lose your household

The main idea is to get a lump sum for a specific project you already know the expenses. We recommend you conduct comprehensive research to help you qualify for the particular amount you need.

Should You Choose HELOC or Home Equity Loan?

You should get it if you already know the cost of your project, meaning you will get a lump sum in cash, which will provide you peace of mind. At the same time, you can prefer a fixed interest rate that will not change over time.

Since it comes with fixed monthly installments, you can create a relevant repayment strategy that will provide you peace of mind. Finally, you can consolidate high-interest debt, which will help you boost your credit score and ensure the best course of action.

On the other hand, you should choose HELOC if you wish to borrow based on your preferences when you need the amount you want. At the same time, if you have college tuition and upcoming expenses, you should avoid borrowing until you are ready.

We recommend you consider fluctuating payments because that may affect your situation and increase overall expenses.

Reasons to Tap the Home Equity

We can differentiate numerous reasons you should use a home equity loan or line of credit. Still, it is vital to remember the best uses possible, which is why you should stay with us for additional information.

1.   Home Improvements

Home improvement projects are one of the most common reasons people take advantage of HELOC. Apart from making your home more comfortable than before, you can use various upgrades to increase your home’s value and boost the interest of potential buyers, especially if your goal is to resell it in the future.

Tapping the home value is the perfect option for financing significant projects such as kitchen renovation, which will boost your home’s value. These investments will pay themselves since you will increase the overall appeal of your household.

Another reason for choosing home improvements for equity loans (forbrukslån uten sikkerhet) is the chance to deduct the interest paid on renovations, which is a vital way to save more money in the long run. As a result, you will use your home’s value to increase, which is essential to remember.

2.   College Expenses

Taking advantage of a HELOC or a home equity loan is the best way to fund a college education, especially if a lending institution allows you to do it in the first place. When it comes to student loans, they are still better and the most common ways to pay for an education.

Using the equity has specific benefits because the rates are generally lower than student loans. At the same time, you can extend the debt term, which will help you reduce the monthly installments, which is vital to remember.

Suppose your goal is to fund your child’s education using a home equity loan. We recommend calculating monthly installments during the amortization process and determining whether you can repay the debt before retiring.

If that is not possible, you should consider getting a student loan because it comes with a grace period until your loved one starts gaining income to repay the debt. The main goal is to talk with a professional who can help you determine the best course of action.

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