What is a home equity loan?
A home equity loan is a second mortgage that lets you borrow a lump sum against the equity in your home, repaid at a fixed rate over a set term. You receive the full amount at closing and pay it back in equal monthly installments, while your first mortgage stays exactly as it is.
Because the rate is fixed and the payment never changes, a home equity loan suits a borrower who knows the exact amount they need and wants a predictable payoff.
How does a home equity loan work?
You borrow once, at closing, and get the money as a single lump sum. From there you repay it on a fixed schedule, often over 10 to 20 years, at a rate that is locked for the life of the loan. It sits behind your existing mortgage as a second lien, which is why people call it a second mortgage. Your first mortgage and its rate are untouched.
How much can I borrow with a home equity loan?
The amount depends on your equity and the lender's combined loan-to-value cap. Lenders limit your total loans against the home to a percentage of its value, commonly 80 to 85 percent, and a few programs go higher. If your home is worth $600,000 and you owe $350,000, an 80 percent cap allows $480,000 in total borrowing, which leaves about $130,000 you could take as a home equity loan. To size your own number, start with how to calculate your home equity.
What is the interest rate on a home equity loan?
National average fixed home equity loan rate. Source: Curinos. Verified as of July 13, 2026. Fixed rate: 7.36 percent
The rate is fixed, so it does not move after closing. It is usually higher than a first-mortgage rate, because the second lien is riskier for the lender, and it is typically far lower than credit card or personal loan rates. Your actual rate depends on your credit, your equity, and the lender.
What can I use a home equity loan for?
You can use the funds for almost anything. Common uses are home renovations, consolidating high-interest debt into one fixed payment, a large one-time expense, or covering the down payment on a second property. Because the money arrives as a lump sum, it fits a defined, one-time cost better than an open-ended need.
What are the requirements to qualify?
Lenders look at your equity, your credit score, your debt-to-income ratio, and your income. You generally need enough equity to stay inside the CLTV cap after the new loan, a credit profile the lender accepts, and income that supports the added payment. Requirements vary widely between lenders. As Emmett Clark, licensed in 18 states with access to more than 240 wholesale lenders, I can often place a file that one lender declines with another whose guidelines fit it.
What happens if I cannot repay it?
A home equity loan is secured by your home, so falling behind puts the property at risk. The lender holds a lien and can foreclose if the loan goes unpaid, the same as with a first mortgage. That is the tradeoff for the lower rate: you are borrowing against the house itself, not on your signature alone.
How is a home equity loan different from a HELOC?
A home equity loan is a fixed lump sum with a fixed payment. A HELOC is a revolving line you draw from over time, usually at a variable rate. If you want the full picture, read what a HELOC is and then the side-by-side in HELOC versus home equity loan. If you are deciding whether to touch your first mortgage at all, see home equity loan versus cash-out refinance.
Frequently Asked Questions
Is a home equity loan the same as a second mortgage?
Yes. A home equity loan is one type of second mortgage, meaning a loan that sits behind your first mortgage and is secured by the same home.
Can I get a home equity loan with lower credit?
Sometimes. Some lenders work with lower scores, though you can expect a higher rate and tighter terms. Because guidelines differ by lender, a file that one turns down may still qualify elsewhere.
Does a home equity loan have closing costs?
Usually yes, though they tend to be lower than the closing costs on a full first mortgage, since the loan is smaller. Ask each lender for a fee breakdown before you commit.
How long does it take to get a home equity loan?
It varies by lender and whether a full appraisal is required, but a second mortgage can often close faster than a first mortgage because the loan is smaller.
Is home equity loan interest tax deductible?
It can be, generally when the funds are used to buy, build, or substantially improve the home securing the loan. Rules are set by the IRS and depend on your situation, so confirm with a tax professional.
Emmett Clark
Licensed Mortgage Loan Officer · NMLS #233747 · 20+ Years Experience
This article has been reviewed for accuracy by Emmett Clark, a licensed mortgage professional serving homebuyers across 18 states including California, Texas, Florida, Arizona, and Colorado. Last updated: July 10, 2026.
About Emmett NMLS #233747
Emmett Clark (NMLS #233747) is a licensed mortgage professional with 20+ years of experience helping families achieve their homeownership dreams. Licensed in 18 states nationwide, Emmett specializes in finding the right mortgage solution for each client's unique situation. Powered by Loan Factory, Emmett provides access to competitive rates and a wide variety of loan programs including conventional, FHA, VA, and down payment assistance programs.
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