Financing
Home equity loan
A home equity loan is closed-end credit secured by home equity that generally advances a lump sum and is repaid under a scheduled term.
Glossary
Financing
Primary references on this page:
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FDIC: installment, revolving, secured, and unsecured loansA HELOC is open-end credit that can support repeated advances during a draw period; a home equity loan usually funds once. Both can be subordinate mortgages and place the home at risk if payments are not made. Compare rate structure, fees, payment, draw flexibility, total cost, and lien position.
How home equity loan works
Use a home equity loan when the amount and timing are reasonably known and a scheduled payment fits the plan. Use a HELOC comparison when draws may occur in stages, but stress-test rate and payment changes. Include the new lien in CLTV and in sale or refinance payoff planning.
Worked example
A $50,000 home equity loan generally funds $50,000 at closing, subject to costs and settlement figures, while a $50,000 HELOC provides a line whose drawn balance changes as money is borrowed and repaid.
Common mistakes and review checks
Treat the result or document as one input to a decision. Verify the current source document, definitions, dates, and transaction facts before relying on it.
This is general educational information, not legal or tax advice. Rules vary by state and locality and change over time — check your local law and confirm specifics with a qualified professional.