Home Equity: common questions
Each answer links to the guide it comes from, with sources.
Is a HELOC a second mortgage?
If you already have a mortgage, yes. The CFPB says a HELOC or home equity loan taken out on top of an existing mortgage is a second mortgage, which you pay in addition to your first.
Can I lose my home with a HELOC or home equity loan?
Yes. Your home is the collateral. If you fall behind or can't repay on schedule, you could lose it through foreclosure.
Can a lender freeze my HELOC?
In some cases, yes. Federal rules let a lender stop new draws or lower your limit if your home's value drops a lot, or if it reasonably believes your finances have changed for the worse so you can't repay. It can't do so for just any reason.
Do I have to pay off a HELOC when I sell my home?
Generally, yes. The CFPB says that if you sell your home, you're usually required to pay off the HELOC in full right away.
Can I make interest-only payments on a HELOC?
Some HELOCs allow interest-only payments during the draw period. That keeps the payment low, but you pay nothing toward the balance, so the payment goes up when repayment starts.
Is the rate on a home equity loan fixed?
Usually. The CFPB says a home equity loan usually has a fixed rate, though some are adjustable. Ask the lender which kind you're being offered.
Is it a good idea to pay off credit cards with a home equity loan?
The CFPB points out that you're taking out one loan to repay another, and now your home secures it. Be careful about trading short-term debt for long-term debt at a higher total cost.
Do Saturdays count toward the three days?
Yes. For the right to cancel, business days include Saturdays but not Sundays or federal holidays.
How fast do I get my money back if I cancel?
The lender must return any money or property you paid within 20 calendar days after it receives your cancellation notice.
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