Home Equity Loan (Second Mortgage)
A fixed-rate lump sum secured by your equity, on top of your existing mortgage.
How it works
A home equity loan is a fixed-rate second mortgage that delivers a lump sum repaid over a set term, sitting behind your first mortgage. Like a HELOC, it lets you tap equity without disturbing a low first-mortgage rate. It's well suited to one-time expenses where you want predictable payments, unlike a HELOC's variable revolving credit.
Key things to know
- Weigh the new rate and term against your current loan — a refinance resets the clock.
- Budget 2-5% of the balance in closing costs (or roll them in for a higher rate).
- Find your break-even: costs divided by monthly savings.
- Cash-out is capped at 80% LTV conventional/FHA; VA cash-out can reach 100%.
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Frequently Asked Questions
- What is the home equity loan (second mortgage)?
- A home equity loan is a fixed-rate second mortgage that delivers a lump sum repaid over a set term, sitting behind your first mortgage. Like a HELOC, it lets you tap equity without disturbing a low first-mortgage rate. It's well suited to one-time expenses where you want predictable payments, unlike a HELOC's variable revolving credit.
- What does it cost?
- Most refinances run 2-5% of the loan in closing costs. A no-closing-cost version trades those fees for a slightly higher rate.