A home equity loan (sometimes called a "second mortgage" or HEL) gives you a single lump sum upfront, secured by your home's equity, repaid on a fixed schedule at a fixed rate — structurally, a lot like your first mortgage, just smaller and second in line.
Who it's best for
Homeowners with a known, one-time expense amount — a specific renovation with a fixed contractor bid, consolidating a known amount of higher-interest debt, a defined large purchase. If you know the exact number you need, a home equity loan is usually a better fit than a HELOC's variable-rate revolving structure.
Why people choose it over a HELOC or cash-out refinance
- Fixed rate, fixed payment. You know exactly what you owe each month for the life of the loan — no exposure to rate increases.
- Leaves your first mortgage rate untouched, same advantage as a HELOC — important if you locked a low rate on your primary mortgage.
- Simpler to budget against than a HELOC, since there's no draw-period-to-repayment-period transition to plan around.
What lenders look at
Your combined loan-to-value (CLTV) — your first mortgage balance plus the new home equity loan, divided by your home's value — is the key number. Most lenders cap CLTV around 80-85%, meaning you generally need to keep at least 15-20% equity in the home after both loans.
Home equity loan rates, CLTV limits, and terms vary by lender and credit profile. This is general information, not a recommendation to borrow against your home.