Home Equity Loan
Fixed-rate second mortgage for predictable payments and large one-time expenses
Your rate depends on your credit score, combined loan-to-value ratio, debt-to-income ratio, property type, occupancy, and loan amount. Home equity loans have fixed rates; HELOCs have variable rates that can increase after account opening. All loans are subject to credit and property approval.
Key Features of Home Equity Loans
Fixed Interest Rate
Your rate never changes, providing predictable monthly payments for the entire loan term
Lump Sum Disbursement
Receive all funds at closing, perfect for large expenses like home renovations or debt consolidation
Terms From 5 to 30 Years
Flexible repayment terms from 5 to 30 years to fit your budget and financial goals
What Is a Home Equity Loan?
A home equity loan is a fixed-rate second mortgage that allows you to borrow against the equity you've built in your home. Unlike a HELOC, which works like a credit card, a home equity loan provides you with a lump sum of cash at closing that you repay with fixed monthly payments over a predetermined term, typically 10-30 years.
Home equity loans are secured by your property, which means they typically offer lower interest rates than unsecured loans like personal loans or credit cards. The fixed interest rate provides payment stability and makes budgeting easier since your monthly payment amount never changes throughout the life of the loan.
The amount you can borrow depends on your home's current market value, your existing mortgage balance, your credit score, and your debt-to-income ratio. Most lenders allow you to borrow up to 80-90% of your home's value minus what you owe on your primary mortgage, though the exact percentage varies by lender and borrower qualifications.
How Does a Home Equity Loan Work?
A home equity loan works by using your home as collateral to secure a second mortgage. Here's the process:
The Application Process
You apply for a specific loan amount based on your home's equity. The lender will verify your income, credit score, and order an appraisal to determine your home's current market value. This process typically takes 21-45 days from application to closing.
Loan Disbursement
At closing, you receive the entire loan amount in a lump sum. This makes home equity loans ideal for large, one-time expenses where you know exactly how much money you need upfront.
Repayment Structure
You'll make fixed monthly payments that include both principal and interest. Since the rate is fixed, your payment amount remains the same throughout the entire loan term, making it easy to budget and plan.
Example Scenario
Home Equity Loan Requirements
Credit Requirements
- ✓Minimum credit score: 620+
- ✓Better rates with 680+ score
- ✓Clean payment history preferred
Equity Requirements
- ✓Minimum 15-20% home equity
- ✓Maximum 90% combined LTV
- ✓Professional appraisal required
Income Requirements
- ✓Debt-to-income ratio under 43%
- ✓Stable employment history
- ✓Verifiable income documentation
Calculate Your Home Equity Loan
Estimate how much you could borrow and what your payments might be.
For illustration only; not a loan offer or commitment to lend. Results use the interest rate you enter and exclude taxes, insurance, and closing costs. Actual rates, terms, and borrowing limits depend on credit, income, property, and lender approval.
Pros and Cons of Home Equity Loans
Advantages
- ✓Fixed interest rate: Predictable payments that never change
- ✓Lower rates: Typically lower than credit cards or personal loans
- ✓Tax benefits: Interest may be deductible for home improvements
- ✓Large loan amounts: Access significant funds based on equity
- ✓Fast funding: Receive all funds at closing
Considerations
- ⚠Home as collateral: Risk of foreclosure if you can't pay
- ⚠Closing costs: 2-5% of loan amount in fees
- ⚠Reduced equity: Less ownership stake in your home
- ⚠Market risk: Home values can decline
- ⚠Fixed amount: Can't borrow more without refinancing
Best Uses for a Home Equity Loan
Home Improvements
Kitchen remodels, bathroom renovations, additions, roofing, and other improvements that add value
Debt Consolidation
Pay off high-interest credit cards, personal loans, or other debts with one lower-rate payment
Education Expenses
College tuition, graduate school, or paying off existing student loans at lower rates
Investment Property
Down payment for rental property or real estate investment opportunities
Emergency Expenses
Large medical bills, major repairs, or other unexpected financial emergencies
Business Investment
Start or expand a business, purchase equipment, or invest in business opportunities
Home Equity Loan vs HELOC
| Feature | Home Equity Loan | HELOC |
|---|---|---|
| Interest Rate | Fixed rate | Variable rate |
| Disbursement | Lump sum at closing | Draw as needed |
| Payment Structure | Fixed monthly payments | Interest-only option during draw |
| Best For | Large one-time expenses | Ongoing or uncertain costs |
| Rate Risk | No rate risk | Rate can increase |
How to Apply for a Home Equity Loan
Get Pre-Qualified
Quick online application to see how much you can borrow and your estimated rate
Submit Documents
Provide income verification, tax returns, and property information for full approval
Home Appraisal
Professional appraiser determines your home's current market value
Close & Fund
Sign documents and receive your funds, typically within 21 days
No impact to credit score • Fast approval • Competitive rates
Home Equity Loan FAQ
Get answers to the most common questions about home equity loans
What is a home equity loan?
A home equity loan is a fixed-rate loan secured by your home's equity. You receive the full amount at closing and repay it with equal monthly payments over a set term, typically 5 to 30 years. Because it is usually behind your first mortgage, it is often called a second mortgage.
What are the advantages of a fixed-rate home equity loan?
Your rate and payment never change, which makes budgeting simple and protects you if rates rise. That makes a home equity loan a good fit for a one-time expense with a known cost, such as a quoted renovation or paying off specific debts.
What terms are available?
Terms commonly range from 5 to 30 years. Longer terms lower your monthly payment but increase the total interest you pay. Your rate depends on your credit score, combined loan-to-value ratio, and the term you choose.
How is a home equity loan different from a cash-out refinance?
A home equity loan is a separate loan with its own payment that leaves your first mortgage untouched. A cash-out refinance replaces your first mortgage with a larger one. If your current mortgage rate is lower than today’s rates, a home equity loan lets you keep it.
Ready for Your Home Equity Loan?
Get started with a quick pre-qualification in under 2 minutes