Understand your home-equity options
Before borrowing for a renovation or another expense, compare how each option affects your mortgage, your monthly budget, and your remaining equity.
Three structures to discuss
A home-equity loan provides a lump sum. A home equity line of credit (HELOC) lets you draw funds up to an approved limit under the agreement’s terms. If you already have a mortgage, these generally add a second loan rather than replace the first.
A cash-out refinance replaces your existing mortgage with a larger loan and provides funds from the difference after applicable costs and payoffs. Ask Eric which options are currently available for your Arizona or California property and circumstances.
Look ahead to repayment
Ask whether the rate is fixed or adjustable, when payments can change, and what happens when a HELOC’s borrowing period ends. Compare fees and repayment terms as well as the amount you can access.
These loans use your home as security. If you cannot repay, you could lose the home. Borrowing to pay off other debts also changes the risk when you replace unsecured debt with debt secured by your home.
Set a purpose and a limit
Write down the amount you need, when you need it, and the payment your budget can support. For a project with costs spread over time, ask how the borrowing schedule changes the comparison.
Bring your current mortgage statement and details of any other loans secured by the property. Ask Eric to compare keeping your current first mortgage with replacing it. Include a plan for unexpected costs rather than treating the available borrowing limit as a spending target.
Common questions
Does a HELOC have a fixed payment?
Not necessarily. HELOCs usually have adjustable rates, and payments can vary with the balance and the repayment phase. Ask for the specific payment rules before deciding.
Can I borrow all of my home’s equity?
Do not assume your full equity is available to borrow. Ask Eric what the lender would require for your property and finances, how existing loans affect the calculation, and how much equity would remain.
Keep comparing
Mortgage refinance: explore the related guide
Consumer resources
Consumer Financial Protection Bureau: home-equity loans and HELOCs
Consumer Financial Protection Bureau: HELOC borrowing and repayment guide (PDF)
Educational information, not a loan offer or commitment to lend. Availability and eligibility depend on the lender, program, property, and borrower. Ask Eric about current requirements. Read the mortgage disclosures.
Put your questions on the table.
Talk with Eric about your plans, your timeline, and what you want to understand.