A mortgage and a Home Equity Line of Credit (HELOC) are both forms of borrowing that utilize your home as collateral, but they differ in purpose, structure, interest rates, repayment, and loan amount.

A mortgage is typically used to finance the initial purchase of a home or refinance an existing mortgage. It is a long-term loan with a fixed or adjustable interest rate and a set repayment term. Monthly payments are made over the loan term, gradually reducing the principal and paying interest.

On the other hand, a HELOC is a revolving line of credit that allows homeowners to borrow against the equity they have built in their homes. It provides flexibility to access funds as needed during a draw period, usually a few years. During this period, borrowers typically pay interest-only payments on the amount borrowed. After the draw period ends, a repayment period begins, where borrowers make principal and interest payments.

Mortgage interest rates are generally lower than HELOC rates since mortgages are considered less risky for lenders. Mortgage rates can be fixed or adjustable, while HELOC rates are typically variable and tied to a benchmark rate. Repayment terms for mortgages are structured, while HELOCs offer more flexibility during the draw period.

Mortgages are used for larger loan amounts based on the home’s appraised value and the borrower’s creditworthiness. HELOCs allow homeowners to borrow against the equity they have in their homes, which is the difference between the home’s market value and the outstanding mortgage balance.

It’s important to carefully review and compare the terms and conditions offered by different lenders for both mortgages and HELOCs. This will help you choose the borrowing option that aligns with your financial needs and goals. Seeking guidance from mortgage professionals or financial advisors can provide further assistance based on your specific situation.