HELOC basics
A home equity line of credit is a revolving line secured by your home. It usually has a draw period, when you can borrow and may pay interest only, followed by a repayment period. Most HELOC rates are variable and tied to an index such as the prime rate.
Home equity loans
A home equity loan pays a lump sum with a fixed rate and fixed term.
How second mortgages work, how they are priced, and when they may be a better fit than a cash-out refinance.
Combined loan-to-value
Lenders cap the first mortgage plus the second lien as a share of value, called CLTV.
When a second lien may fit
- Your first mortgage terms are favorable compared with today’s market.
- You need a smaller amount or need it over time.
Risks
Variable payments can rise, and the lender can freeze or reduce a HELOC in some circumstances. Read the disclosures the CFPB requires for HELOCs.
Compare total cost
A second lien leaves your first mortgage untouched, which can matter when that loan has favorable terms. Compare the total cost of a second lien over the time you will carry it with the cost of replacing the whole first mortgage.
Read the HELOC terms
Ask about draw period length, how payments change when repayment begins, any annual or inactivity fees, and whether the lender can freeze or reduce the line if values fall.
General education only; confirm current rules with official sources and a licensed lender.
Sources
Sources checked 10/23/2026.