Borrow against your equity as you need it and pay interest only on what you use. Estimate your available line and payments, including a higher-rate scenario.
HELOC rates are usually variable and move with an index, often the prime rate. The rate shown is a sample. Combined loan to value limits depend on the lender and property.
Interest-only payment, draw period
$0/mo
Estimate only. Assumes a draw period of about 10 years with interest-only payments, then full repayment. The +2 points figure shows the interest-only payment if the rate rises 2 points. Fees, margins and rate caps vary by lender.
Three ways to use equity. The right one depends on your current rate and how you plan to use the funds.
| Feature | Cash-out refinance | HELOC | Home equity loan |
|---|---|---|---|
| How it works | Replaces your mortgage with a new, larger loan | A revolving line behind your first mortgage | A fixed second loan behind your first mortgage |
| First mortgage | Replaced | Stays in place | Stays in place |
| Rate | Usually fixed for the loan term | Usually variable | Usually fixed |
| Funds | One lump sum at closing | Draw as needed during the draw period | One lump sum at closing |
| Often fits | Your current rate is near or above today's rate, or you want a single payment | Ongoing or uncertain costs, such as phased projects | One known expense with a fixed payment |
Things to weigh
If you cannot repay, the home is at risk. Lenders can also freeze or reduce a line in some situations. Duane can compare it with a cash-out refinance or a fixed home equity loan.
Lenders limit your combined loan to value, often 80% to 90%. The available line is that limit minus your first mortgage balance.
Sometimes, when the funds are used to buy, build or improve the home that secures the loan. Ask a tax advisor.
Draws stop and you begin paying principal and interest. The payment can rise a lot, so plan ahead.
If your current mortgage rate is low, keeping it and adding a HELOC can cost less. If today's rates are close to yours, one new loan may be simpler. Duane can run both.
Programs vary. Primary homes are the most common. Second homes and investment properties may have lower limits or may not qualify.
Yes, with state rules such as an 80% combined loan to value limit.
Duane Buziak, NMLS #1110647. Licensed in VA, FL, TN, GA, NC, SC, MD, DC, WV, TX and KY. Brokered through Coast2Coast Mortgage, NMLS #376205. Verify licenses at nmlsconsumeraccess.org. For illustration only. Not a loan offer, commitment or rate quote. Equal Housing Opportunity.