Home Equity 101

Learn the difference between a HELOC and a HELOAN, how compensation is earned, & more

What's the difference between a HELOC and a Home Equity Loan?

A HELOC (Home Equity Line of Credit) can be an adjustable-rate or fixed-rate mortgage, a borrower takes out on their home and is used as a line of credit. It works like a credit card, with the ability to borrow (draw) money (against the equity in their home) and/or pay the line down at different points in time. An adjustable-rate HELOC is tied to the prime rate and the borrower has the option to only pay interest on what they use. A fixed-rate FIXLINE offers the same flexibility of drawing the line up or down, but the rate is fixed for the life of the loan, and payments are fully amortized, and there are no interest-only options available to the borrower.

A Home Equity Loan (HELOAN) is a fully amortized fixed-rate mortgage providing the borrower a lump-sum as opposed to a line of credit. If the borrower were to take $150,000 out of the equity of their home, they would receive one payment of $150,000 and begin to pay interest on the full amount immediately. The loan is similar to a fixed rate agency loan, but in a second lien position.

HELOCs and Home Equity Loans offer borrowers considerably lower interest rates than those of credit cards, and give the ability to tap home equity, without impacting a low rate first mortgage. That’s why many people opt to use these mortgages to consolidate their debt or make big purchases with lower interest rates!

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How is compensation paid on HELOCs & HELOANs?

HELOCs (adjustable-rate or fixed-rate line of credit)

Borrower Paid Compensation (BPC) is available.

BPC is Paid on the draw amount.

We accept submissions with BPC range of 0% - 4% of the draw amount.

Fixed-Rate HELOC only — LPC is available. Your fee is paid by Spring EQ in the amount equal to your compensation election on file.

HELOANs (fixed-rate, lump-sum loan)

Borrower Paid Compensation (BPC) or Lender Paid Compensation (LPC) is available.

We accept submissions with BPC range of 0% - 3% of the draw amount.

LPC — Your fee is paid by Spring EQ and the amount equal to your compensation election on file.

Which option is right for your borrowers?

Consider a HELOC:

- For those who want better cashflow with an I/O option.

- For those who need periodic access to cash/flexibility.

- For those who want to see large payments on the outstanding balance and see a corresponding payment reduction.

Consider a HELOAN:

- For those who are concerned about fluctuating interest rates.

- For those on fixed income and need stable payments.

- For those who have an immediate need for cash.