Key takeaways
- Home equity loans are lump sums; HELOCs are revolving lines.
- Your home is collateral.
- Watch for closing costs and variable rates.
Best for
Homeowners with equity and a significant planned expense.
Home equity loan
A lump sum with fixed payments, secured by your home.
HELOC
A revolving line secured by your home. You draw during a draw period, then enter repayment. Rates are often variable.
Important
Because your home is collateral, falling behind can put it at risk. Borrow carefully and for purposes that add value.
Pros and cons
Advantages
- Often lower rates than unsecured debt
- Larger amounts possible
- Flexible (HELOC)
Things to weigh
- Your home is collateral
- Closing costs may apply
- Variable rates can rise
Frequently asked questions
How much equity can I borrow?
+
It depends on your home's value, what you owe, and the lender's limits, often expressed as a combined loan-to-value ratio.
Can HELOC payments change?
+
Yes. Many HELOCs have variable rates, and payments often rise when the draw period ends.
Is the interest tax-deductible?
+
In some cases, depending on how funds are used. Ask a tax professional about your situation.
This guide is general educational information, not financial, legal, or tax advice. Terms, requirements, and availability vary by lender and your situation.