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Home equity loan vs. home equity line for vacant land purchase?
I own a home that is half paid off but I would like to build a new one next year. It's a little early in my "new home plan" for buying property, but I just found the perfect vacant property at a really great price. I'd like to buy the property and do nothing with it until I'm ready to build next year. Unfortunately, I don't have enough cash on hand to buy the property outright so I'll need a loan of $21,000 or $22,000 (I have plenty of equity in my home to cover that). My bank has already pre-approved me for a home equity loan at 6.4% but I have yet to look at line of credit rates. Does anybody have any opinions as to whether a home equity loan or a home equity line of credit is better in this situation?
By the way, the property does not have water/sewer and is not in an area where there's any zoning at all so a lot loan doesn't seem to be an option.
According to http://www.bankrate.com/ , home equity line of credit interest rates are currently lower than home equity loan rates though obviously that could change.
1 Answer
- David MLv 71 decade agoFavorite Answer
A home equity loan can come with a fixed rate of interest. A home equity line of credit will have a variable and most likely higher rate of interest attached to it. So I'd go with the home equity loan, especially if you believe interest rates will soon rise as I believe they will.
