A home equity loan—also known as an equity loan, home equity installment loan, or second mortgage—is a type of consumer debt. Home equity loans allow homeowners to borrow against the equity in their home. The loan amount is based on the difference between the home’s current market value and the homeowner’s mortgage balance due. Home equity loans tend to be fixed-rate, while the typical alternative, home equity lines of credit (HELOCs), generally have variable rates.
KEY TAKEAWAYS
· A home equity loan, also known as a “home equity installment loan” or a “second mortgage,” is a type of consumer debt.
· Home equity loans allow homeowners to borrow against the equity in their residence.
· Home equity loan amounts are based on the difference between a home’s current market value and the mortgage balance due.
· Home equity loans come in two varieties—fixed-rate loans and home equity lines of credit (HELOCs).
· Fixed-rate home equity loans provide one lump sum, whereas HELOCs offer borrowers revolving lines of credit.
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