Borrow against your equity and keep your low first mortgage rate
A HELOC (home equity line of credit) and a HELOAN (home equity loan) both let you borrow against the equity in your home without refinancing your first mortgage. A HELOC works like a credit card secured by your home, with a variable rate. A HELOAN pays one lump sum with a fixed rate and a fixed payment. Because we work with dozens of lenders, we can compare both options for homeowners across California, Oregon, Washington, Arizona and Hawaii.
HELOC (home equity line of credit). You are approved for a credit limit and draw only what you need, when you need it. During the draw period, often 10 years, many lenders allow interest-only payments. After that, the balance is repaid over a set term. The rate is usually variable and tied to the prime rate, so the payment can change. A HELOC fits ongoing or uncertain costs such as a remodel paid in stages or a cash reserve.
HELOAN (home equity loan). You receive the full amount at closing and repay it with a fixed rate and the same monthly payment for the whole term, commonly 5 to 30 years. A HELOAN fits a one-time expense with a known cost, such as paying off higher-interest debt or a single large project.
Keep your low first mortgage rate. If your current mortgage carries a rate below today's market, a HELOC or HELOAN lets you access equity without giving up that rate. A cash-out refinance replaces the entire first mortgage at the current rate.
Borrow only what you need. You pay interest on the second mortgage balance only, not on a brand new, larger first mortgage.
Common uses. Home improvements, paying off higher-interest debt, education costs, a down payment on another property, or a cash reserve for emergencies.
Tradeoffs. Second mortgage rates are usually higher than first mortgage rates, a HELOC payment can rise when rates rise, and your home secures the loan. When a large share of your balance would be on the second mortgage, a cash-out refinance can cost less overall. We run both scenarios so you can compare the total cost side by side.
A HELOC (home equity line of credit) is a revolving credit line with a variable rate that you draw on as needed. A HELOAN (home equity loan) pays you one lump sum at a fixed rate with a fixed monthly payment. Both are second mortgages that leave your first mortgage in place.
Most lenders allow a combined loan-to-value (your first mortgage plus the new loan) of up to 80% to 90% of your home's value, depending on credit, occupancy and the lender.
If your first mortgage has a rate lower than today's rates, a second mortgage lets you borrow against your equity without replacing that low-rate loan. A cash-out refinance replaces the whole first mortgage at the current rate.
Many programs start around a 620 to 680 credit score, with the best rates and highest loan amounts going to stronger credit and lower combined loan-to-value.
Most HELOCs and home equity loans are for primary residences, but some lenders offer them on second homes and investment properties, usually at a lower maximum loan-to-value and a higher rate. For buying or refinancing a rental, see our Investment / DSCR loans.
Common uses include home improvements, paying off higher-interest debt, education costs, a down payment on another property, or a cash reserve for emergencies.
