HELOC vs Home Equity Loan: How to Compare
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Educational comparison only. Not a quote, recommendation, or offer of credit.
HELOC vs Home Equity Loan: side by side
| HELOC | Home Equity Loan | |
|---|---|---|
| Structure | Revolving line of credit | Lump sum, closed end second mortgage |
| Rate type | Usually variable, tied to an index plus margin | Usually fixed for the full term |
| How funds arrive | Draw as needed during the draw period | Single lump sum at closing |
| Payment | Interest only or low payment during draw, then full amortization | Fixed principal and interest from month one |
| Predictability | Payment changes as the balance and index change | Payment is the same every month for the term |
| Best for | Ongoing, staged, or unknown funding needs | Single, defined, one time funding need |
| Closing costs | Often low or minimal | Typically higher than a HELOC but lower than a refinance |
| Lien position | Second lien behind the first mortgage | Second lien behind the first mortgage |
When each option tends to make more sense
When heloc tends to fit
When a HELOC tends to fit
- Spending will happen in phases or over time, not all at once
- Flexibility to draw and repay matters more than rate certainty
- The line might be paid down quickly between draws
- Borrower is comfortable with a rate that can move with the index
When home equity loan tends to fit
When a home equity loan tends to fit
- The funding need is a single, defined amount today
- A fixed, predictable monthly payment is a priority
- Borrower wants to lock in today's rate for the full term
- There is no expected need to redraw funds in the future
Run the numbers
- Home Equity Loan Calculator
Estimate payment for a fixed rate lump sum second mortgage.
- HELOC vs Cash-Out Calculator
Compare a HELOC against a cash out refinance.
- Mortgage Payment Calculator
Compare the combined first plus second lien payment.
- DTI Calculator
See how a second lien payment affects debt to income.
Frequently asked questions
Is a home equity loan the same as a HELOC?
Do both sit behind the first mortgage?
Can a HELOC rate go up after closing?
Which has lower closing costs?
Can a borrower convert a HELOC balance to a fixed rate?
Does either option require an appraisal?
Other decision guides
HELOC vs. Cash-Out Guide
Compare three loan structures, calculate potential access, stress-test variable rates and use a fillable comparison worksheet.
Free fillable PDF. No email or signup required. Educational information, not a loan offer or personalized advice.
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