Home equity
Most people arrive asking for a HELOC because it is the option they have heard of. It is often the wrong one. The right answer depends on what the money is for, how fast you will repay it, and what rate you are already sitting on.
Replaces your existing mortgage with a larger one
Large, one-time needs — a renovation, a debt consolidation, a property purchase — especially when your current rate is at or above today's market.
You give up your existing rate on the whole balance. If you are sitting on a low first mortgage, this is usually the most expensive option available to you.
A second loan alongside your existing mortgage
A known, fixed amount when you want to keep a low first-mortgage rate untouched and want payment certainty.
Two payments, and second-lien pricing is higher than first-lien. You are borrowing a lump sum whether or not you need it all on day one.
A revolving credit line secured by your home
Staged or uncertain spending — a phased remodel, a bridge between purchase and sale, a standby reserve you may never draw.
The rate is usually variable and can move after you draw. Most lines have a draw period followed by a repayment period, and the payment can step up sharply at that boundary.
The deciding factors
This is the single biggest factor and the one most often skipped. Refinancing a 3% first mortgage to reach equity can cost more over the life of the loan than the equity is worth.
A variable rate on a balance you will clear in eighteen months carries very different risk than the same rate on a balance you will carry for fifteen years.
Pricing tiers move with combined loan-to-value, and leaving a margin protects you if values soften before you need to sell or refinance again.
Consolidating unsecured debt moves it onto your home. That can be the right call, and it changes what happens if the plan does not hold.
Send your current balance, rate and a rough sense of what the funds are for. You will get a straight comparison of all three routes against your actual position — including the case for doing nothing.
Product descriptions on this page are general and educational, and do not state or offer any specific rate, term, payment or credit limit. Availability, pricing and terms vary by lender, program, property and borrower profile. Home equity products are secured by your home; failure to repay can result in the loss of the property. This is not a commitment to lend.