Look beyond the opening payment
Ask what payments could become after an introductory rate or a HELOC draw period ends. Compare the repayment schedule with your budget and the time you expect to stay in the home.
Home / Your optionsTHE MYHOMEEQUITY TOOLKITThree ways to borrow.
Three ways to borrow.
One home to protect.
Compare the structure before you compare the rate. Each option uses your home as collateral, but the way you receive money and repay it differs.
Your Options
Ways to Access Your Equity
There are three primary ways homeowners tap into their home equity. Each has different structures, rates, and ideal use cases.
A revolving line
HELOC
Draw from a credit line during the draw period, within the terms of the agreement. The balance is secured by your home.
- Borrow in stages instead of all at once
- Usually has a variable interest rate
- Payments may change as the rate or balance changes
- New draws stop when the repayment period begins
- Ask about fees, minimum draws, and payment changes
One lump sum
Home equity loan
Receive a set amount upfront and repay it over an agreed term. If you already have a mortgage, this generally adds a separate loan.
- Often uses a fixed interest rate
- Repay the full borrowed amount over time
- Generally keeps your existing first mortgage in place
- Compare fees and total repayment, not just the rate
- Your home secures the additional debt
A replacement mortgage
Cash-out refinance
Replace your existing mortgage with a larger one and receive cash after the old loan and applicable costs are paid.
- Changes the mortgage on your whole balance
- Can change the rate and length of repayment
- May include closing costs
- Compare the new mortgage with keeping the old one
- A lower monthly payment does not always mean a lower total cost
SIDE BY SIDE
Same collateral. Different mechanics.
| Consideration | HELOC | Home equity loan | Cash-out refinance |
|---|---|---|---|
| How you receive money | Draw as needed within the line’s terms | One lump sum | Cash from a larger replacement mortgage |
| Existing first mortgage | Generally stays in place | Generally stays in place | Replaced with a new mortgage |
| Rate structure | Usually variable; some offer fixed-rate options | Usually fixed | Depends on the new mortgage |
| Key question | What happens when the draw period ends? | Can I afford the payment on the full amount? | What does replacing my whole mortgage cost? |
Further reading: CFPB: alternatives to a HELOC and how HELOCs work. Missing payments on debt secured by your home can put the property at risk.
PUT IT INTO PRACTICE01 02 03 Explore the guide library ↗
Bring better questions to the conversation.
Compare the whole borrowing cost
Request itemized fees, closing costs, annual charges, and any early-closure terms. For a refinance, compare costs on the full replacement mortgage, not just the extra cash.
Consider whether borrowing is necessary
A smaller project, staged spending, or saving longer may avoid new debt. Compare alternatives on total cost and risk, not just their advertised monthly payment.