Home equity loan vs. HELOC — what's the difference?

A home equity loan is a one-time lump sum with a fixed rate and fixed payment; a HELOC is a revolving credit line with a variable rate. Choose a home equity loan for predictability, a HELOC for flexibility.

Is a home equity loan a second mortgage?

Yes. It sits as a second lien behind your primary mortgage, so you keep your existing first-lien rate and add a separate fixed payment for the equity loan.

Is the interest rate fixed?

Yes. Unlike a HELOC's variable rate, a home equity loan locks your rate for the life of the loan, so your payment stays the same from the first month to the last.

How much can I borrow with a home equity loan?

Most lenders allow a combined loan-to-value (first mortgage plus the equity loan) of 85%–90% of your home's value. Your exact amount depends on your equity, credit, and income.

equity loan

Home Equity Loan

A home equity loan lets you borrow a one-time lump sum against your home's equity at a fixed rate and fixed monthly payment — ideal when you know exactly how much you need and want predictable repayment.

Down payment: N/A — based on existing equity (typically need 15%–20% remaining equity after the loan)
Credit score: 680 typical; some lenders accept 660
Loan amount: Up to 85%–90% combined loan-to-value (CLTV) of home value
MI: None

Best for

Homeowners funding a one-time expense with a known cost
Borrowers who want a fixed rate and a predictable monthly payment
Owners consolidating high-interest debt into a single fixed payment
Renovations, tuition, or major purchases planned as a lump sum
Homeowners who want to keep their low first-lien mortgage rate

Eligibility

At least 15%–20% equity in your home after the new loan
Credit score of 680+
DTI typically under 43%
Documented income (similar to a refinance)
Property appraisal or AVM

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The upside

Fixed interest rate — your payment never changes
Receive the full amount as a lump sum at closing
Doesn't replace your existing mortgage — you keep your low first-lien rate
Predictable payoff on a set term (typically 5–30 years)
Closing costs are typically lower than a cash-out refinance

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Worth considering

You pay interest on the entire balance from day one, even unused funds
Less flexible than a HELOC — you can't re-borrow as you repay
Your home is collateral — default risks foreclosure
Taking out a large second lien reduces the equity cushion in your home

Documents you'll need

Two most recent pay stubs
Two years of W-2s and tax returns
Most recent mortgage statement
Current homeowners insurance declaration page
Property tax bill

When a home equity loan makes sense

If you have a specific, one-time expense — a renovation with a firm bid, a debt consolidation payoff, a tuition bill — and you want the certainty of a fixed rate and a fixed payment, a home equity loan is often the cleaner choice over a HELOC. You take the full amount at closing and repay it on a set schedule with no surprises.

Like a HELOC, it lets you tap your equity without touching your first mortgage — so if you locked a low rate in 2020, you keep it. The trade-off is flexibility: you borrow once and pay interest on the whole balance, so it’s best when you know exactly how much you need.

Common questions

Home equity loan vs. HELOC — what's the difference?: A home equity loan is a one-time lump sum with a fixed rate and fixed payment; a HELOC is a revolving credit line with a variable rate. Choose a home equity loan for predictability, a HELOC for flexibility.
Is a home equity loan a second mortgage?: Yes. It sits as a second lien behind your primary mortgage, so you keep your existing first-lien rate and add a separate fixed payment for the equity loan.
Is the interest rate fixed?: Yes. Unlike a HELOC's variable rate, a home equity loan locks your rate for the life of the loan, so your payment stays the same from the first month to the last.
How much can I borrow with a home equity loan?: Most lenders allow a combined loan-to-value (first mortgage plus the equity loan) of 85%–90% of your home's value. Your exact amount depends on your equity, credit, and income.