Home Equity · Home Loan Studio

Home equity

The floor plan of what you own.

Home equity is the part of the house you actually own (market value minus what you still owe). Once enough of that floor plan belongs to you, it can be drawn on without selling the home.

Two ways to draw on it: a home equity loan (lump sum, fixed payment) or a HELOC (a line of credit you draw from as needed). Each fits different situations.

Geoffrey runs the comparison against your specific equity position and use case.

06

Plan view What you own, drawn

01 · Three structures

Three ways to tap equity.

You have built equity. The question is which instrument fits what you actually need to do with it. Three options, each works differently, each makes sense in different situations.

Equity Loan

Fixed second lien.

Lump sum at a fixed rate, paid back monthly over a fixed term (10-30 years). Second mortgage that sits behind your existing first lien. Predictable payment. Best if you know exactly how much you need and want certainty.

Best for: known amount, fixed-payment preference

HELOC

Revolving line.

Home Equity Line of Credit. Like a credit card secured by your home. Variable rate. Draw what you need, when you need it, during a 10-year draw period. Pay back the balance during a 20-year repayment period. Best for ongoing expenses or staged projects.

Best for: variable need, staged spending

Cash-Out Refi

Restructure the first.

Pay off your existing first mortgage and write a new larger first mortgage. The difference is cash. Typically 0.25-0.50% above rate-and-term refi rates. Best when you also want to restructure your first lien (lower rate, change term).

Best for: large amounts, combining with rate change

02 · Decision matrix

Which one. For which situation.

Factor	Equity Loan	HELOC	Cash-Out Refi
Amount needed	Known, lump sum	Variable, drawn over time	Large, often combined with rate change
Rate type	Fixed	Variable (tied to Prime)	Fixed
First mortgage	Untouched	Untouched	Replaced
Closing costs	Moderate	Often minimal or zero	Highest (full refi)
Typical rate	+0.5% to +2% over first	+1% to +3% (variable)	+0.25% to +0.5% over rate-term refi
Best use	Renovation with known budget	Ongoing projects, emergency fund	Large debt consolidation, rate refi combined

For the full side-by-side comparison with scenarios, see equity loan vs HELOC.