Yes. Some homeowners use a home equity loan for a known major expense and keep a HELOC open for future flexibility. Combined loan-to-value limits apply.

HELOC vs Home Equity Loan

Q: What is the difference between a HELOC and a home equity loan?

A HELOC is a revolving line of credit with variable interest rates, letting you borrow as needed. A home equity loan gives you a lump sum with a fixed interest rate and fixed monthly payments.

Q: Which has lower interest rates?

HELOCs typically have lower initial rates, but they are variable and can increase. Home equity loans have slightly higher fixed rates that never change.

HELOC gives you a revolving credit line with variable rates. A home equity loan gives you a lump sum with a fixed rate. The better choice depends on your project.

Side-by-Side Comparison

Factor	HELOC	Home Equity Loan
Structure	Revolving credit line	Lump sum
Interest Rate	Variable (prime + margin)	Fixed
Draw Period	10 years (interest-only payments)	N/A (full disbursement at closing)
Repayment	Variable, then amortised	Fixed monthly payments from day 1
Best For	Ongoing expenses, phased renovations	Known expenses, debt consolidation
Rate Risk	Payments can increase if rates rise	None (fixed rate locked at closing)
Closing Costs	Low to none	2-5% of loan amount

Which Is Right for You?

Answer 3 quick questions to get a recommendation.

Question 1 of 3

What are you using the funds for?

Payment Shock Warning

HELOCs have a draw period (typically 10 years) where you make interest-only payments. When the draw period ends, you begin paying principal and interest. This transition can double your monthly payment. Plan for this before choosing a HELOC.

Tax Deductibility

Both HELOCs and home equity loans are tax-deductible if the funds are used for home improvements (under post-TCJA rules). Interest is not deductible if used for debt consolidation, education, or other non-home purposes. Keep documentation of how funds are spent.

Alternatives to Consider

Cash-Out Refinance

Replace your entire mortgage at a new rate. Good when rates are lower than your current mortgage.

Personal Loan

Unsecured, no home risk. Higher rates but no closing costs. Best for smaller amounts.

401(k) Loan

Borrow from retirement. No credit check. Risk: missing investment growth while repaying.

Frequently Asked Questions

What is the difference between a HELOC and a home equity loan?

A HELOC is a revolving line of credit with variable rates. A home equity loan is a lump sum with a fixed rate and fixed payments.

Which has lower interest rates?

HELOCs typically start lower but are variable. Home equity loans have slightly higher fixed rates. Over time, a HELOC may cost more if rates rise.

Can I get both?

Yes. Some homeowners use a home equity loan for a known expense and keep a HELOC for flexibility. Combined LTV limits apply.

What are the requirements?

Both require 15-20% equity, 680+ credit score, DTI under 43%, and stable income.

Is the interest tax-deductible?

Only if funds are used for home improvements. Not deductible for debt consolidation or other purposes.

What happens if I cannot pay?

Both use your home as collateral. If you default, the lender can foreclose on your home.