I made this video because many homeowners know they have equity, but they do not know the best way to access it.
A HELOC, a HELOAN, and a cash-out refinance can all help homeowners use equity, but they work very differently.
Quick Answer
A HELOC is usually a revolving line of credit. A HELOAN is usually a lump-sum home equity loan. A cash-out refinance replaces your current mortgage with a new mortgage that allows you to access equity as cash at closing. The right option depends on your current mortgage, equity, credit, income, goals, and how you plan to use the funds.
What Is a HELOC?
A HELOC, or home equity line of credit, is an open-end line of credit that allows homeowners to borrow repeatedly against available home equity. The CFPB explains that a HELOC lets you borrow using the available equity in your home, and that falling behind on payments can put the home at risk.
This may be useful when you want flexibility, such as for ongoing renovations or expenses that happen in stages.
What Is a HELOAN?
A HELOAN, or home equity loan, is usually a lump-sum loan secured by your home equity.
Instead of drawing funds over time, the borrower generally receives one amount and repays it over a set term.
This may be useful when you know exactly how much money you need.
What Is a Cash-Out Refinance?
A cash-out refinance replaces your existing mortgage with a new mortgage. If you qualify and have enough equity, the new loan may allow you to receive cash back at closing.
This may be useful when you want to access equity and refinance your first mortgage at the same time.
How to Compare the Options
Before choosing a home equity strategy, compare:
- Your current mortgage rate
- The new rate and term
- Monthly payment
- Closing costs
- Fixed vs. variable rate
- Total interest over time
- Whether you want a lump sum or flexible access
- Whether you want to keep your current first mortgage
- How long you plan to stay in the home
Simple Comparison
| Option | How it works | May fit when |
|---|---|---|
| HELOC | Revolving line of credit secured by home equity | You want flexible access to funds |
| HELOAN | Lump-sum home equity loan | You know exactly how much you need |
| Cash-Out Refinance | New first mortgage with cash back at closing | You want to replace your current mortgage and access equity |
Frequently Asked Questions
Is a HELOC the same as a home equity loan?
No. A HELOC is typically a line of credit, while a home equity loan is usually a lump-sum loan.
Can I access equity without selling my home?
Possibly. Homeowners may be able to use a HELOC, HELOAN, second mortgage, or cash-out refinance, subject to qualification.
Is a cash-out refinance better than a HELOC?
It depends. A cash-out refinance replaces your first mortgage. A HELOC may allow you to keep your current first mortgage in place.
Can I use home equity to consolidate debt?
Possibly, but it should be reviewed carefully because you are using your home as collateral.
What This Means for Southwest Florida Homeowners
If you own a home in Fort Myers, Cape Coral, Naples, Lehigh Acres, Punta Gorda, Port Charlotte, North Port, or surrounding areas, your equity may give you options. The key is choosing the structure that fits your goals.
Call or text Tim Hart: 239-910-5668
Tim Hart | VanDyk Mortgage Fort Myers | NMLS# 354676