Home Equity Loan vs. HELOC: Same Equity, Two Very Different Tools

The good news is you don't have to. A home equity loan and a HELOC both sit behind your first mortgage, so your first loan, your rate, and your payment stay exactly where they are.

But they are not the same product, and picking the wrong one can cost you for years.

The home equity loan: certainty

A home equity loan gives you one lump sum up front at a fixed rate. You get the same payment every month until it's paid off. It works best when you know the number: a new roof, a kitchen remodel, or rolling high-interest credit card balances into one fixed payment with a set payoff date.

The HELOC: flexibility

A HELOC is a line of credit. You draw what you need, when you need it, and you pay interest only on what you've used. Most HELOCs have a variable rate and an interest-only draw period. It works best when costs come in stages, like a remodel paid out over months, or when you want a safety net you hope you never touch.

The math, with example rates

Here's a simple example on $100,000.

Home equity loan, 15-year fixed at 7.49%: about $926 a month, fully paid off in 15 years.

HELOC at 7.75%, interest-only draw period: about $646 a month, but the balance isn't going down, and the rate can move with the market.

The bottom line: a HELOC gives you the lower, more manageable payment and flexibility. A home equity loan gives you a fixed rate you can count on.

Why who shops it matters

Your actual rate depends on your credit, your equity, your loan amount and, just as much, who is shopping it for you. A bank can offer you its own version of each product. As a wholesale mortgage broker, Sunview Lending compares options across many lenders, so you can see both side by side and choose the one that fits your plan.

Want to see which one fits your numbers? Start at sunviewlending.com.

Example rates and figures only, not a quote, not an offer to lend. Both loans are secured by your home.