Borrowing against your home: HELOCs and home equity loans
Quick Answer
You can borrow against the equity in your home with a home equity line of credit (HELOC), a home equity loan or a cash-out refinance. All three use your home as collateral, so you could lose it if you can't repay. They differ in how you get the money and how payments work.
Equity is the part of your home's value you own outright: what it's worth minus what you still owe. Lenders let you borrow against it in three main ways.
- A HELOC works like a credit line. You draw what you need, when you need it, usually at a variable rate.
- A home equity loan pays you one lump sum, usually at a fixed rate with the same payment each month.
- A cash-out refinance replaces your mortgage with a bigger one and pays you the difference.
Each one adds a monthly payment and costs money to set up. If you're 62 or older, a reverse mortgage is another option, with no monthly mortgage payment but a balance that grows over time.
Guides
- What is a HELOC, and how does it work?A home equity line of credit explained: the draw period, the repayment period, variable rates, fees and the risks to watch for.
- What is a home equity loan?A home equity loan explained: a lump sum, usually at a fixed rate with a fixed payment, how it differs from a HELOC, and the risks.
- Can you cancel a home equity loan or HELOC after you sign?The three-day right to cancel (rescission) for refinances, home equity loans and HELOCs: who has it, how long it lasts and how to use it.
Run your own numbers with the heloc payment calculator, or see every question we answer about home equity.
Common Questions
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.