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Home equity loan vs. line of credit

Tap the equity you've built in your home for major or ongoing expenses.


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Chances are, your home is your biggest financial asset. As you pay down your mortgage, you build equity that you can then put to work through a home equity loan or HELOC.

Both loans use your home as collateral, which can be a powerful motivator for timely repayments. But how you access your cash depends on the loan you choose.

How do home equity loans and lines of credit compare?

Both loans offer unrestricted financing, or money that you can use for any purpose, backed by the equity in your home. And how much you can borrow typically tops out at 80% to 95% of your home equity, depending on your credit score.

But they differ in how you access your equity and pay back what you borrow.

Home equity loansHELOCs
Typical eligibility
  • At least 15% equity in home
  • Up to 50% debt-to-income ratio
  • 620 or higher credit score
  • Ability to repay based on income, assets, monthly expenses and credit history
  • At least 20% equity in home
  • Up to 50% debt-to-income ratio
  • 620+; 720+ for the strongest rates
  • Ability to repay based on income, assets, monthly expenses and credit history
Interest rateFixedVariable, though some lenders allow conversion to a fixed rate
Access to fundsLump-sum paymentWithdraw money as you need it, paying interest on the amount you draw
Use of fundsNo restrictionsNo restrictions
Term lengthsTypically 5 to 15 yearsDraw period: Typically 5 to 10 years
Repayment period: Typically 10 to 25 years
Closing costsYesVaries
Learn more about Home Equity loans

Learn more about line of credit loans

Choose a home equity loan if you …

  • Need money for a one-time expense.
  • Want predictable payments with fixed interest rates.
  • Have at least 15% equity in your home and a credit score of at least 620.

Choose a home equity line of credit if you …

  • Expect your expenses to increase over time.
  • Want flexible access to your money.
  • Need credit approval quickly.

Bottom line

If you need cash, you may be able to use your home as collateral with a home equity loan or line of credit. Home equity loans are best for financing a project with a fixed cost, while HELOCs give you flexible access to your money over time.

Borrowing against the equity in your home is not a decision to be taken lightly. Before committing, compare home loan lenders and weigh the benefits against any drawbacks.

Frequently asked questions

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