Fixed rates, predictable payments
If you’ve built equity in your home, a home equity loan can be a powerful way to access cash—without refinancing your entire mortgage. Often referred to as a “second mortgage,” this loan provides a one-time lump sum with a fixed interest rate and predictable monthly payments.
Here’s how home equity loans work—and when they make sense.
What Is a Home Equity Loan?
A home equity loan allows you to borrow against the value you’ve built in your home. The loan amount is based on:
- Your home’s current value
- Your existing mortgage balance
- The lender’s maximum loan-to-value limits
Once approved, you receive the funds in a lump sum and repay the loan over a fixed term, typically 5–30 years.
Fixed Rates = Payment Stability
One of the biggest advantages of a home equity loan is rate certainty. Unlike variable-rate products, a home equity loan offers:
- A fixed interest rate
- Consistent monthly payments
- Clear payoff timeline
This predictability makes budgeting easier—especially when rates are fluctuating.
Home Equity Loan vs. HELOC
While both tap into equity, they work very differently:
Home Equity Loan
- Lump-sum payout
- Fixed interest rate
- Fixed monthly payment
- Ideal for large, one-time expenses
HELOC
- Line of credit
- Variable rate
- Flexible withdrawals
- Better for ongoing or uncertain expenses
Choosing between them depends on how—and when—you plan to use the funds.
Common Uses for Home Equity Loans
Homeowners often use home equity loans for:
- Major renovations or remodels
- Debt consolidation
- Education expenses
- Medical bills
- Large one-time purchases
Because rates are often lower than personal loans or credit cards, they can be a cost-effective financing option.
Pros and Cons to Consider
Pros
- Fixed rate and payment
- Lower interest than unsecured debt
- Lump sum for large expenses
Cons
- Uses your home as collateral
- Less flexible than a HELOC
- Closing costs may apply
Used wisely, a home equity loan can be a strategic financial tool.
How Affinity Home Lending Helps Homeowners Tap Equity
We help homeowners:
- Determine available equity
- Compare home equity loans vs. HELOCs
- Secure competitive fixed rates
- Structure terms to fit long-term goals
Equity should work for you—not against you.