Home Equity Loan

A Home Equity Loan is very similar to a mortgage, which is why it’s often called a second mortgage. You receive a one-time lump sum of funds, and it’s secured by your home’s equity (your home’s value minus the balance you still owe on your first mortgage). It’s also similar to a Home Equity Line of Credit (HELOC), as both options are based on your home’s equity. However, it differs in that you’ll have a fixed rate and consistent monthly payments, so you’ll always know what to expect.

A Home Equity Loan is an excellent fit for a one-time, planned expense (or multiple expenses if the total borrowed can cover everything). Examples could be tackling home upgrades, paying off other high-interest credit cards and loans through debt consolidation, or covering other significant purchases. However, keep in mind that because payments start immediately after the loan is funded, it’s best suited for situations where you know precisely what you’ll need and when.