2026-09-14T00:00:00|6.968|0.023|6.274|0.035|6.725|-0.009|6.623|0.032||
Home Equity Loans & HELOCs: Access Your Home's Value
Home equity loans and HELOCs let you borrow against your home's value without
refinancing your first mortgage. Learn the differences, rates, and when each makes sense.
Home Equity Loan vs. HELOC
Both let you borrow against your home equity, but they work differently. A home equity loan provides a lump sum at a fixed rate, while a HELOC is a revolving line of credit with a variable rate.
| Feature | Home Equity Loan | HELOC |
|---|---|---|
| How You Get Funds | Lump sum at closing | Draw as needed (like a credit card) |
| Interest Rate | Fixed | Variable (often tied to Prime) |
| Monthly Payment | Fixed, predictable | Changes with balance and rate |
| Draw Period | N/A | 5–10 years |
| Repayment Period | 5–30 years | 10–20 years after draw period |
| Max LTV | 80–85% CLTV | 80–85% CLTV |
| Interest Deductible? | If used for home improvements | If used for home improvements |
| Best For | Known, one-time expenses | Ongoing or uncertain expenses |
How Much Can You Borrow?
85%
Max Combined LTV
620+
Min Credit Score
43%
Max DTI Ratio
15 + yrs
Min Ownership (Typical)
Your borrowing limit is based on Combined Loan-to-Value (CLTV). If your home is worth $500,000 and you owe $300,000, your available equity at 85% CLTV is: ($500K x 85%) - $300K = $125,000.
When to Choose Each Option
Home Equity Loan
Best for one-time expenses with known costs: major renovation, debt consolidation, or large purchase. Fixed rate gives payment certainty. Good when you want to borrow a specific amount.
HELOC
Best for ongoing expenses or uncertain costs: phased renovations, emergency fund access, or college tuition payments over time. Only pay interest on what you draw. Good when you need flexibility.
Cash-Out Refinance
Best when you also want to change your first mortgage rate or term. See our cash-out refinance guide for details. Not ideal if your current rate is already low.
Home Equity Risks to Understand
Important Considerations
Your home is collateral — failure to repay can result in foreclosure, just like your first mortgage
HELOC rate risk — variable rates can increase significantly; a 3% rate today could be 8% in 3 years
Closing costs apply — expect $2,000-$5,000 in closing costs for home equity loans (some lenders waive them)
Reduces your equity cushion — if home values decline, you could owe more than your home is worth
HELOC payment shock — when the draw period ends, payments increase because you start repaying principal
Use our mortgage calculator to estimate equity loan payments, or check today's rates. Explore refinancing as an alternative to access equity.
Home Equity Loan vs HELOC Explained
Refinance & Equity Guides
Official Government Resources
CFPB — Owning a Home
Consumer Financial Protection Bureau guide to buying a home,
comparing loan offers, and understanding closing.
HUD — Buying a Home
Department of Housing & Urban Development resources for
homebuyers, including FHA program information.
VA — Home Loans
Official VA home loan program information, eligibility, and
Certificate of Eligibility requests.
Freddie Mac — Rate Survey
Weekly Primary Mortgage Market Survey, a benchmark for national
average mortgage rates.
FHFA — Loan Limits
Federal Housing Finance Agency conforming loan limits by county,
updated annually.
IRS — Mortgage Interest Deduction
IRS guidance on deducting home mortgage interest, points, and
eligible mortgage-related expenses.
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