HELOC vs home equity loan
A home equity loan pays you one lump sum, usually at a fixed rate. A home equity line of credit (HELOC) lets you borrow as you need up to a limit, usually at an adjustable rate. Both are second mortgages that keep your first mortgage and its rate in place.
Home equity loan
- One lump sum at closing.
- Usually a fixed rate and a fixed monthly payment.
- Fits a single known cost, like a renovation with a firm bid.
HELOC
- A credit line secured by your home. Paying it down frees up credit again.
- Usually an adjustable rate, so the payment changes with the rate and the balance.
- Fits costs that come in stages, like a project paid over several months.
Things to check
- Your home secures both. Missing payments can lead to foreclosure.
- Ask about annual fees, minimum draws, and what happens when the draw period ends.
- For a HELOC on the home you live in, you generally have three business days to cancel after opening it.
Questions people ask
- Is a HELOC better than a cash-out refinance?
- If your first mortgage rate is lower than today's rates, a HELOC or home equity loan lets you keep it. A cash-out refinance replaces the whole loan.
- Can I get a HELOC on a co-op?
- Some lenders offer co-op share loans or lines of credit, but many do not. The co-op board may also need to approve.
- Do I get a Closing Disclosure for a HELOC?
- No. HELOCs come with Truth in Lending disclosures instead of a Loan Estimate and Closing Disclosure.
Official sources
- CFPB, Home equity loan vs. HELOC ↗
- CFPB, Regulation Z section 1026.23, right of rescission ↗
- CFPB, Understand the different kinds of loans ↗
Facts checked 2026-11-01. General information, not financial, legal or tax advice. We are not a lender.