For many Americans, a home is not only a place to live—it’s also their most valuable asset. Over time, as you pay down your mortgage and your property value increases, you build home equity—the difference between your home’s current market value and what you still owe on your mortgage.
If you need access to cash, you may be able to tap into that equity through two common types of second mortgages: a Home Equity Loan (HELOAN) or a Home Equity Line of Credit (HELOC). Since these loans use your home as collateral, they typically offer lower interest rates than credit cards or unsecured personal loans.
A home equity loan provides a lump-sum amount with a fixed interest rate and consistent monthly payments over a set term. This option is ideal if you know exactly how much you need—for example, to fund a home renovation, consolidate debt, or cover a large one-time expense.
Key Benefits:
One-time lump-sum payout
Fixed interest rate and predictable payments
Ideal for borrowers on a strict budget or in a rising-rate environment
A HELOC is a revolving credit line that allows you to borrow as needed—similar to a credit card—up to an approved limit. You only pay interest on the amount you actually use, offering flexibility for ongoing or uncertain expenses like medical bills, tuition, or a long-term home project.
Key Features:
Borrow only what you need, when you need it
Typically comes with a variable interest rate
Offers flexibility during a set “draw period”
Payments can vary depending on usage and rate changes
With a HELOC, you may access funds via online transfers, in-branch advances, checks, or even a card (depending on your lender).
Before borrowing against your home, it’s crucial to understand the risks and responsibilities:
Collateral Risk: Both HELOANs and HELOCs use your home as collateral. Failing to repay the loan could result in foreclosure.
Tax Deductibility: Interest on home equity loans may be tax-deductible if the funds are used for qualifying home improvements—check with a tax advisor.
Budget Fit: Be sure the repayment terms and potential rate changes fit comfortably within your long-term financial plan.
When used wisely, home equity loans and lines of credit can be powerful financial tools—helping you fund major life expenses, invest in your home, or manage debt over time.
Speak with one of our loan consultants to determine which option best meets your needs and goals.