A home equity loan is a second mortgage that gives you a single lump sum at closing, with a fixed rate and a fixed monthly payment. It sits behind your existing first mortgage and leaves your first loan untouched.
A HELOC is a revolving line at a variable rate. A home equity loan is a one-time lump sum at a fixed rate. If you know the exact amount you need and want budget certainty, the home equity loan tends to be the cleaner tool.
Use cases that fit well include a large, defined home improvement project, paying off a known balance of higher-interest debt, or funding a one-time expense like a tuition bill or a down payment on another property.
You take on a second monthly payment in addition to your first mortgage. The rate is usually higher than your first mortgage rate. Run the combined payment in your budget before you close. Closing costs apply.
See the side-by-side breakdown in HELOC vs home equity loan.
Compare three loan structures, calculate potential access, stress-test variable rates and use a fillable comparison worksheet.
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Both let you tap home equity. The right tool depends on what you need the money for, how long you need it, and what your current first mortgage looks like.
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