What is the difference between a Home Equity Loan and a Home Equity Line of Credit (HELOC)?
- English
- Español
A home equity loan is a specific amount of money borrowed against the equity of your home. A Home Equity Line of Credit (HELOC) is a line of credit, like a credit card, except you are borrowing against the equity of your home. For both home equity loans and HELOCs, if you already have a mortgage these new loans would be considered second mortgages that you’d need to pay in addition to your first mortgage.
With a home equity loan, you receive the money you are borrowing in a lump sum payment, and you may have a fixed or adjustable interest rate. With a Home Equity Line of Credit (HELOC), you can borrow or draw money multiple times from an available maximum amount. Similar to a credit card, when you make payments on your HELOC the amount of available credit is replenished. HELOCs usually have adjustable interest rates and the payment will vary depending on the outstanding balance.
Download our booklet to help you understand how HELOCs work , as well as how to shop around and watch out for pitfalls.
If you are having trouble paying your mortgage, before taking out a home equity loan or home equity line of credit, talk to a housing counselor to see if there may be other options that make better financial sense for you. Call the CFPB at (855) 411-CFPB (2372) to be connected to a HUD-approved housing counseling agency today.