 TITLE: How to Finance Your Next Home Improvement Project CONTENT: Home Equity Loans and HELOCs\n----------------------------\nOne of the most common ways to finance home improvements is through a second mortgage in the form of a home equity loan or a home equity line of credit.\nBoth are designed for homeowners who have at least 20% equity in their homes, and the debt is secured by the home itself. As a result, home equity loans and lines of credit typically offer lower interest rates than other loan types, especially unsecured loans.\nIf you use loan funds from a home equity loan or line of credit to buy, build or substantially improve the home used to secure the debt, you may be able to deduct some or all of the interest paid on your tax return.\nHome equity loans and lines of credit are best if you're confident in your ability to repay the debt on time. Here's what you need to know about each one.\n### Home Equity Line of Credit\nA home equity line of credit, also called a HELOC, typically comes with a variable interest rate that can fluctuate along with market rates. These typically start out lower than the fixed rate you might get with a home equity loan, but over time the variable rate can increase and potentially cost you more in the long run.\nAs a result, HELOCs are best for people who plan to pay off their debt relatively quickly. By doing this, you can take advantage of the lower initial variable rate and eliminate the debt before that rate goes up too much.\nHELOCs are also good for homeowners who have ongoing renovation projects. Instead of giving you the full amount of the loan upfront, the lender allows you to revolve a balance, taking out debt and paying it off over and over again.\n### Home Equity Loan\nA home equity loan provides borrowers with the full loan amount upfront and a fixed interest rate. Depending on the loan terms, you may have between five and 30 years to repay the debt.\nBecause home equity loan interest rates stay fixed for the life of the loan, they're best for homeowners who plan to pay off what they owe over a long period. They're also excellent for borrowers who have just one home improvement project and don't need to revolve a balance. END