Equity Sharing Agreement vs. HELOC vs. Home Equity Loan
When it comes to home equity, most people think of taking out a loan. However, there are other ways to tap into your home equity. You can enter into an equity sharing agreement, get a home equity line of credit (HELOC), or get a home equity loan. So, which is the best option for you? It depends on your needs and objectives.
An equity sharing agreement is an arrangement between two people who own a property together. The agreement spells out how the equity in the property will be divided if the property is sold. Equity sharing agreements are often used by people who are not related, such as business partners.
A HELOC is a revolving line of credit that you can use as needed. A HELOC is secured by your home equity and typically has a lower interest rate than a personal loan or credit card. You only pay interest on the amount you borrow from your HELOC.
A home equity loan is a lump sum loan that is repaid over a fixed period of time, usually 5 to 15 years. Home equity loans are typically used for one-time expenses, such as home renovations or consolidating debt. Home equity loans have a fixed interest rate and monthly payment.
So, which option is best for you? If you need a lump sum of money for a one-time expense, a home equity loan is likely your best bet. If you need a flexible line of credit that you can use as needed, a HELOC is a good option. And if you want to enter into an agreement with someone to share the equity in your property, an equity sharing agreement is the way to go.