If you’re a homeowner looking to tap into your equity, two of the most common options are a HELOC (Home Equity Line of Credit) and a Home Equity Loan (often called a HELOAN). While both allow you to borrow against your home’s equity, they work very differently and are designed for different financial needs.
Understanding the differences can help you choose the option that fits your goals, cash flow, and long-term plans.
A HELOC is a revolving line of credit secured by your home. It works similarly to a credit card, but with lower interest rates because it’s backed by real estate.
With a HELOC, you’re approved for a maximum credit limit, but you only borrow what you need, when you need it.
Key features of a HELOC
Variable interest rate that can change over time
Monthly payments required
Draw period (typically 5–10 years)
Repayment period after the draw phase
Interest-only payment options may be available during the draw period
A HELOC is best for homeowners who want flexibility and ongoing access to funds.
A Home Equity Loan is a one-time, lump-sum loan secured by your home. It is structured more like a traditional mortgage.
You receive the full loan amount upfront and repay it over a fixed term with fixed monthly payments.
Key features of a Home Equity Loan
Fixed interest rate
Fixed monthly payment
Set loan term, often 10–30 years
Predictable repayment schedule
One-time disbursement of funds
A home equity loan is best for homeowners who want certainty and predictable payments.
You may want a HELOC if you need flexible access to funds over time, are unsure how much money you’ll need upfront, plan to borrow in stages, can manage potential rate changes, and have reliable cash flow.
You may want a Home Equity Loan if you need a specific amount of money upfront, prefer a fixed rate and payment, are funding a one-time expense, want predictable budgeting, and plan to hold the loan long term.
In short, a HELOC offers flexibility, while a home equity loan offers stability.
HELOCs and home equity loans are commonly used by homeowners with established equity, steady income, and good credit. They work well for borrowers who are comfortable with monthly payments and want traditional loan structures.
These options are often used for home renovations, debt consolidation, education expenses, major purchases, or investment opportunities.
Eligible property types typically include primary residences, some second homes, single-family homes, townhomes, and warrantable condominiums. Certain lenders may also allow owner-occupied two-to-four-unit properties.
Property eligibility depends on occupancy, loan-to-value limits, property type, and lender guidelines. Investment properties, non-warrantable condos, and manufactured homes may have additional restrictions.
Both a HELOC and a Home Equity Loan allow you to tap into your home’s equity, but they serve different purposes.
A HELOC provides flexibility and ongoing access to funds but comes with variable rates. A home equity loan provides predictability with fixed payments and a fixed interest rate.
The right choice depends on how you plan to use the funds, your comfort with rate changes, your cash flow, and your long-term financial goals.
If you’re exploring a HELOC or Home Equity Loan and want help choosing the best option, fill out the form above on this page to get started. Your information will be reviewed, and you’ll receive a personalized evaluation based on your equity, goals, and timeline.
Choosing the right home equity option starts with understanding your full financial picture. A personalized review can help you compare real numbers and select the option that aligns with your goals.
Ebonie Beaco | NMLS #2389954
Mortgage Loan Originator
Licensed in AL, AR, GA, IL, IN, KY, MI, MO & VA
Loan Factory, Inc. | NMLS #320841
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