Another option, which will be a bit cheaper because closing costs will be much less, is an installment second mortgage. Like a HELOC, this is a second loan, using the equity in your home as collateral, but unlike the home equity line of credit, the installment loan will have both a principal and interest payment, so you'll pay it off without a balloon payment at the end of the loan term. The problem with this loan is that the interest rates are much higher, and the loan terms are usually much lower. Generally, you get 8-10 percent interest and 10-15 year terms. Rarely is it a good idea to take this type of loan, unless you are a sub-prime borrower.
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