On Tuesday, I discussed Home Equity Lines of Credit (HELOCs), which are lines of credit that allow you to access the equity in your home. Today, I will discuss another variation of the home equity product line, the Home Equity Loan (HELOAN). These loans function similarly to the HELOC in many ways: they sit in the second lien position behind a
mortgage, offer you access to the equity in your home so you can use the cash for things you need, and offer exceptional rates relative to the marketplace because they are secured by a piece of property.

But unlike a revolving line of credit, a HELOAN is a loan with a fixed term, fixed rate, and fixed payment schedule. In this capacity, a HELOAN acts more like a mortgage than a HELOC. So if you have a specific purchase, such as a second home or a boat, and would like to use your own equity to buy it, this is a common way to do so if you want a fixed payment schedule.

Another major difference between HELOANs and HELOCs is that HELOCs can be in the first lien position, meaning you can have a HELOC even if you don’t have a mortgage. A HELOAN, on the other hand, can generally only go in the second lien position behind a mortgage. So if you don’t have a mortgage, a HELOAN may not work for you.

If you are considering any kind of home equity product to utilize the equity in your home, please contact me and I will help you find the best option available. If you have anything to add about HELOANs, please leave a comment.