Home Equity Loan: How It Works
A lump sum with a fixed rate and fixed monthly payments, secured by your home.
- How you get paid
- One lump sum at closing
- Rate
- Typically fixed
- Payments
- Fixed monthly payments of principal and interest
- Secured by
- Your home, as a second mortgage
- Best for
- A known, one-time expense
A home equity loan gives you a single lump sum of cash, which you repay in fixed monthly payments over a set term. The loan is secured by your home, and it’s separate from your existing mortgage.
How it works
You borrow against the equity you’ve built, meaning your home’s value minus what you owe. The lender looks at your home’s value, your current mortgage balance, your credit and your income to decide how much you can borrow. You receive the full amount at closing and start repaying right away.
Because the rate is typically fixed, your payment stays the same for the life of the loan, which makes budgeting simple.
Who it tends to suit
- Homeowners with a specific, known cost, such as a major repair or paying off higher-interest debt.
- People who want predictable payments.
- Borrowers who like their current mortgage rate and want to leave it alone.
Things to weigh
- Your home is the collateral. Missing payments could put your home at risk.
- You pay interest on the whole amount from day one, even if you don’t spend it all.
- You’ll have two payments each month: your mortgage and the new loan.
- Closing costs and fees can add up.
Compare before you choose
Providers differ on minimum amounts, credit requirements and terms. Browse our comparison directory and filter by how much you want to borrow, or take the quiz to see options that fit your answers.
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Frequently asked questions
Is a home equity loan the same as a second mortgage?
Yes. It's a loan secured by your home that sits alongside your existing mortgage, so you'd have two monthly payments.
Do I keep my current mortgage?
Yes. A home equity loan doesn't replace your first mortgage. A cash-out refinance does.
Are there closing costs?
Often, yes. Costs vary by lender and can include appraisal and origination fees. Ask for them in writing before you commit.
Published November 9, 2026. This article is for general information and isn't financial, legal or tax advice. Terms vary by lender and state. We may be compensated by companies featured on this site. See our advertiser disclosure.