Home equity loan vs HELOC basics
Frequently Asked Questions
Straight answers to the questions we hear most.
A HELOC provides significantly more flexible access to funds. You can draw money as needed during the “draw period” (often 5-10 years), pay it back, and then borrow again. A Home Equity Loan gives you a single, upfront lump sum, after which you cannot access more funds without applying for a new loan.
A Home Equity Loan is a lump-sum loan with a fixed interest rate and fixed monthly payments, functioning like a second mortgage. A HELOC (Home Equity Line of Credit) is a revolving line of credit with a variable interest rate, allowing you to borrow, repay, and borrow again up to your credit limit, similar to a credit card.
A Home Equity Loan provides a single, lump-sum payment upfront, which you repay with a fixed interest rate and consistent monthly payments. A HELOC works more like a credit card, giving you a revolving line of credit to draw from as needed during a “draw period,“ typically with a variable interest rate. You only pay interest on the amount you’ve actually borrowed.
Yes, but only if the loan was used to “buy, build, or substantially improve” the home that secures the loan. The debt must also fall within the $750,000 (or $1 million) total mortgage limit. You cannot deduct interest on a home equity loan used for personal expenses, such as paying off credit card debt or funding a vacation.
Home Equity Loan: Often called a “second mortgage,“ this provides a lump sum of cash upfront at a fixed interest rate. It’s ideal for debt consolidation when you know the exact amount you need to pay off.
HELOC (Home Equity Line of Credit): This works like a credit card, giving you a revolving line of credit to draw from as needed over a “draw period.“ It typically has a variable interest rate. It’s more flexible if you have ongoing expenses or debts to pay off over time.
HELOC (Home Equity Line of Credit): This works like a credit card, giving you a revolving line of credit to draw from as needed over a “draw period.“ It typically has a variable interest rate. It’s more flexible if you have ongoing expenses or debts to pay off over time.
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