HELOC vs Home Equity Loan for new garage construction?

[JFox418]

Bought our home a little over 2 years ago and the one thing it was missing that we really wanted was a shop/garage. It's looking like this years prices are coming down enough to consider my options for a new build and I'm curious what might be the best way to fund it without dumping a bunch of cash up front. 

Are there any preferences between a HELOC or Home Equity Loan? I've done a little reading and it seems like the HELOC would be on profile for a long time. HEL would be more like a personal loan but benefit from being secured and lower interest right? Are there big differences in repayment options? 

We have about $50k of equity in the home and only looking to use maybe $20-$25k for the new garage.  

[VALoanMaster]

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@JFox418 wrote:

Bought our home a little over 2 years ago and the one thing it was missing that we really wanted was a shop/garage. It's looking like this years prices are coming down enough to consider my options for a new build and I'm curious what might be the best way to fund it without dumping a bunch of cash up front. 

Are there any preferences between a HELOC or Home Equity Loan? I've done a little reading and it seems like the HELOC would be on profile for a long time. HEL would be more like a personal loan but benefit from being secured and lower interest right? Are there big differences in repayment options? 

We have about $50k of equity in the home and only looking to use maybe $20-$25k for the new garage.  

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Generally HELOCs are variable rate loans with interest only payments and are set up like a credit card where you can pay it down and reuse it. The downside with a HELOC is that they're typically tied to the prime rate and the Fed Reserve is forecasting at least 3 rate increases in 2022. Since the rate is variable you're looking at 3 rate increases the 1st year.

A HEL is a fixed rate loan with terms that vary from a 15 year fixed to a 30 due in 15 balloon. The rate and payment will typically be higher than a HELOC.