Read our other blogs

Learn The Difference Between A Home Equity Loan vs. HELOC

Written by
David Watermeier
October 14, 2022

HELOCs and home equity loans are loans where you use your home as collateral. Both are good options for borrowing money if you’ve paid a significant portion of your mortgage. Some homeowners think that these two are similar, but in reality, they are not the same.

Let’s look at how these loans work and the significant differences between the two.

What is a home equity loan?

A home equity loan allows you to borrow against your home equity with a fixed interest rate and term. The rate would be based on your credit score, loan amount, payment history, and income.

You can use the cash from the loan however you want like for home renovations or paying off credit card debts.

What is a HELOC?

A HELOC, on the other hand, is a line of credit similar to a credit card. This allows you to borrow up to a specified amount from your home equity and slowly repay the loan.

HELOC terms have two parts: the draw period and the repayment period. The draw period is when you can withdraw funds and can last up to 10 years. The repayment period may last 20 years, so the overall term is 30 years in this case. You also can not borrow any more once the draw period ends.

What are the differences between a home equity loan and a HELOC?

Here are the major differences between the two:

When is a HELOC better than a home equity loan?

A HELOC is the better choice when:

When is a home equity loan better than a HELOC?

A home equity loan is a better choice when:

Both home equity loans and HELOCs can provide funds by using your home as equity. Before you decide which is best in your situation, you should determine how much you need, the purpose of your loan, and whether or not you would like to borrow more in the future.

If you are having trouble deciding, you can get in touch with our loan advisors, who can help you pick the best loan option given your specific needs.

Give us a call or send us a message today.

* Specific loan program availability and requirements may vary. Please get in touch with the mortgage advisor for more information.


For more information or to get pre-approved please contact David Watermeier (NMSL #2278016). If you are planning on buying a home now or within the next 5 years, it's best to start planning immediately.

Cell phone: 714-989-3252