I have access to HELOCs and fixed-rate second mortgage products across a broad range of property and documentation types, so I can compare those alongside a cash-out refinance to find the right structure.
HELOCs and second mortgages are available on select programs for primary residences, second homes, and investment properties, including for self-employed borrowers and, on some programs, DSCR investors.
A home equity line of credit, closed-end second mortgage, or cash-out refinance can turn home equity into usable funds. The right choice depends on how much you need, when you need it, how long you expect to carry the balance, and the terms of your existing first mortgage.
HELOC vs. second mortgage vs. cash-out refinance
| HELOC | Closed-end second mortgage | Cash-out refinance | |
|---|---|---|---|
| How you get the money | Revolving line you can draw on, repay, and draw again | One lump sum | One lump sum added to a new first mortgage |
| Rate | Commonly variable | May be fixed | Fixed or adjustable |
| Your first mortgage | Stays in place | Stays in place | Replaced |
| Payment | Can change with the rate and your balance | Separate payment, may be fixed | One new payment |
| Often a fit when | You want flexible access to funds over time | You need a set amount and want to keep your first-mortgage rate | You want one loan, or today's rates beat your current rate |
Home equity line of credit
A HELOC is a revolving line of credit secured by your home. You can usually borrow, repay, and borrow again during the draw period, up to the approved limit. HELOC rates are commonly variable, so both the rate and payment can change.
Closed-end second mortgage
A second mortgage provides a lump sum with a separate payment from your first mortgage. Depending on the program, it may offer a fixed rate and payment. It can be useful when you want to preserve an attractive first-mortgage rate.
Cash-out refinance
A cash-out refinance replaces your existing first mortgage with a larger loan and gives you the difference in cash. It may simplify payments, but it also reprices your entire first-mortgage balance and may restart the repayment term. Learn more about refinancing →
Compare more than the rate
We should compare the rate, closing costs, payment, draw rules, adjustment terms, total interest, and how long you expect to keep the financing. Possible uses include home improvements, debt consolidation, tuition, investment property, or another major expense.
These loans are secured by your home, so missing payments could put your home at risk. Interest may or may not be tax-deductible depending on how you use the funds. Please check with your tax advisor, as mortgage lenders are not licensed to give tax advice.
Some lenders offer HELOCs and second mortgages with low or no upfront closing costs, which can make sense for shorter-term needs. Availability varies by lender, program, and loan amount, and the rate may be higher than on a loan with upfront costs.
Get a current comparison
Programs, combined loan-to-value limits, credit requirements, and property rules change. I will compare the available HELOC, second-mortgage, and cash-out refinance choices against your current first mortgage before recommending a path.