Reviewed by the Editorial Team · Updated July 10, 2026 · 6 min read
A home equity loan gives you a fixed-rate lump sum secured by your home, repaid at a fixed payment over a set term. Your first mortgage stays untouched.
Key takeaways
A home equity loan delivers a fixed-rate lump sum at closing, repaid at a fixed payment over a set term.
Interest starts accruing on the full amount immediately, unlike a HELOC where interest applies only as funds are drawn.
Combined loan-to-value is typically capped around 80-85%, and the first mortgage's rate and terms stay completely untouched.
It fits a single known expense, like a wedding or one renovation project, better than ongoing or uncertain costs.
Rate type
Fixed for the full term
Disbursement
One lump sum at closing
Max combined LTV
Typically 80–85%
Best for
One known, one-time expense
How a home equity loan works
A home equity loan is a second lien behind your existing mortgage. You borrow one fixed amount at closing and repay it in equal installments, just like your first mortgage.
Fixed rate locked in at closing
Full amount disbursed as a single lump sum
Second lien; first mortgage keeps its own rate and term
Fixed monthly payment for the entire term
Home equity loan vs. HELOC
Home equity loan
HELOC
Rate type
Fixed
Variable
Disbursement
Lump sum at closing
Draw as needed
Payment
Fixed principal + interest
Interest-only, then principal + interest
What it costs
Combined loan-to-value is usually capped around 80–85%, slightly tighter than many HELOCs. Closing costs run lower than a full refinance since only the second loan is originated.
Two payments, not one
You keep your first mortgage payment and add a second, fixed one — total monthly housing cost rises even though each payment is predictable.
Because the rate is fixed, the trade-off for that predictability is usually a somewhat higher starting rate than a HELOC's introductory variable rate.
Who a home equity loan fits
This loan fits borrowers who already know the exact number they need.
One large, defined project like a roof or addition
Borrowers who want a payment that never changes
Anyone uneasy with a HELOC's variable rate
Skip it if your need is open-ended or spread over time — a HELOC's draw-as-you-go structure avoids borrowing (and paying interest on) money before you need it.
It depends on how well-defined your expense is. A home equity loan wins when you know the exact amount and want a fixed payment; a HELOC wins when costs arrive in stages and you want to draw only what you need.
Does a home equity loan replace my first mortgage?
No — it's a separate second loan behind your existing mortgage, which keeps its own rate and term untouched. You end up with two monthly payments instead of refinancing into one.
How much can I borrow with a home equity loan?
Most lenders cap combined loan-to-value around 80–85%, so your first mortgage balance plus the new loan can't exceed that share of your home's appraised value.
How much would a $50,000 home equity loan cost per month?
The exact payment depends on your rate and term, but because home equity loans are fixed-rate and fully amortizing, the payment doesn't change once it's set — unlike a HELOC's interest-only draw payments.
A shorter term costs more per month but far less in total interest. html">mortgage calculator for an exact number.
What is the downside of a home equity loan?
The main downsides are inflexibility and upfront cost: you receive the full lump sum at closing and start paying interest on all of it immediately, even if you don't need it yet, and closing costs typically run 2-5% of the loan. Missing payments also puts your home at risk, since it's secured debt.
Can you get a home equity loan with bad credit?
It's harder but not impossible — most lenders want a credit score of at least 620 and will charge a higher rate for weaker credit.
Because the loan is secured by your home, some lenders are more flexible on credit than they'd be for an unsecured personal loan, provided you have enough equity.
This guide is general information, not a lending decision. Program rules and dollar limits change — verify current figures with a licensed lender and confirm licensing at NMLS Consumer Access. See all loan types.
No calculator matches that. Try “refinance”, “FHA”, “HELOC” or “amortization”.