Home Equity Loans vs. HELOCs

A man using a leveler and making a mark on a wall with a pencil.

Posted on January 24, 2023

Using the equity in your home has never been easier and with rising home prices, you may have more equity than you think. When it comes to accessing equity, you have options. The two most popular options are the home equity loan and home equity line-of- credit (HELOC). While they share many similarities, there are some notable differences. In this article, we’ll cover everything you need to know about home equity loans and lines of credit.

What’s a Home Equity Loan?

Home equity loans are also referred to as a second mortgage. When you apply for a home equity loan, the process is very similar to that of applying for a mortgage. Much like a traditional mortgage, your home is also used as collateral, so if you default on your home equity loan, the lender can foreclose on your house.

Home equity loans typically offer lower interest rates than HELOCs, and the rates are usually fixed, while HELOC rates are usually variable and change with the Prime Rate. With a home equity loan, you usually receive a lump sum of cash when the loan closes, which is to be paid back over the term of your loan in fixed monthly payments.

What’s a Home Equity Line of Credit (HELOC)?

Home equity lines-of-credit are more like a credit card than a traditional mortgage.  Although they also use your house as collateral, HELOCs do not provide a lump sum of cash to you upon approval. Instead, you are given a line-of-credit that can be drawn upon whenever you would like within a pre-agreed upon timeframe.

Although this sounds similar to a credit card, HELOCs typically come with lower rates than credit cards do.  Credit cards are unsecured debt, meaning the lender doesn’t have collateral to collect if the loan defaults.  With your home as collateral, a HELOC is less risky for the lender, which results in lower interest rates compared to other unsecured loans.

KEMBA offers both Home Equity & HELOCS

When you bank with KEMBA, you have access to all of our banking options, including Home Equity Loans and HELOCs. Tap into the equity in your home today to fund the projects or plans you have and enjoy low, competitive rates from KEMBA. If you’d like to know how much you can borrow against the equity in your home, apply for a home equity product today, or contact our local, dedicated associates at 614.235.2395 and select Option 2 to start the process.


 Become a member

Come see why we're a better way to bank.

Open an account