Home Equity Loan.
In plain English
A home equity loan lets you borrow a one-time lump sum against the value you have built up in your home, which is your equity. It has a fixed rate and a set repayment schedule, so payments are predictable, and it is sometimes called a second mortgage. Because your house secures the loan, rates are lower than unsecured borrowing, but missing payments can put the home at risk. It differs from a HELOC, which is a revolving line you draw on as needed rather than a single lump sum.
01Why it matters
A home equity loan can be a cheaper way to borrow because your house backs it, but that same collateral means the stakes of falling behind are your home.
02The math, step by step
You have 150,000 dollars of equity and take a 40,000 dollar home equity loan at a fixed rate to fund a remodel, repaying it in fixed monthly payments over 10 years.
03What this is NOT
A home equity loan is NOT a HELOC. A home equity loan is a fixed lump sum repaid on a set schedule; a HELOC is a revolving credit line you draw from and repay as needed.