Compare Home Equity and HELOC Rates
Updated: March 22nd, 2023
What is a home equity loan (HEL)?
A home equity loan (HEL) allows you to borrow against the equity you’ve built up in your home. Your equity is calculated by assessing your home’s value and subtracting the outstanding balance due on your existing mortgage loan. Unlike a cash-out refinance, a home equity loan does not pay off your existing mortgage. If you already have a mortgage, you’d continue making its monthly payments, while also making payments on your new home equity loan.
What is a home equity line of credit (HELOC)?
A home equity line of credit (HELOC) is another great way to borrow from your home equity without refinancing. A HELOC is similar to a home equity loan, but it works more like a credit card. You can borrow from it up to a preapproved limit, pay it back, and borrow from it again. Another difference between home equity loans and HELOCs is that HELOC interest rates are adjustable; they can rise and fall over the loan term. But, interest is only due on your outstanding HELOC balance — the amount you’ve actually borrowed — and not on the entire line of credit.