heloc vs home equity loan: key differences for homeowners

What sets them apart

A HELOC is a revolving line secured by your home, letting you borrow, repay, and borrow again during a draw period. Rates are typically variable, so payments can change as markets move. A home equity loan delivers a lump sum with a usually fixed rate and predictable payments, helpful when you know the exact cost and want stability.

When to choose one over the other

Pick a HELOC for phased projects, an emergency buffer, or when you value flexibility and paying interest only on what you use. Choose a home equity loan for a single, well-priced purchase and steady budgeting without surprises.

• Rate type: HELOCs often variable; loans typically fixed.
• Access: On-demand line vs. one-time lump sum.
• Payment predictability: Changing vs. set installments.
• Costs: Closing costs, annual or inactivity fees, potential early-termination charges.
• Risks: Rate hikes, overspending on a line, and foreclosure risk if you default.

Compare APR, margin over prime, caps, draw and repayment terms, and prepayment rules. Confirm whether interest is tax-deductible-often only for qualified home improvements. Consider timeline, income stability, and discipline with credit, and speak with multiple lenders to uncover better terms and hidden fees.