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Home equity loan

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Definition

A home equity loan is a closed-end loan secured by a home, usually taken as a single amount and repaid on a set schedule. It is not a revolving HELOC.

In plain English

A home equity loan borrows against equity in a lump sum. The borrower receives the funds once and repays them over the term in the note. A HELOC is a line that can be drawn more than once. Both may be second mortgages, but the way funds are taken is different.

Technical definition

Consumer glossaries treat a home equity loan as a loan secured by the home, typically closed-end. It is not an alias of HELOC.

Why it matters

Mixing this product with a HELOC confuses both household cash-flow and any later discussion of second-lien debt.

Example

Riley borrows a single amount against home equity and repays it on a fixed schedule. That is a home equity loan. A later unused credit line on the same house would be a different product.

Commonly confused with

Related mortgage FAQ: What is the difference between a home equity loan and a HELOC?

Sources reviewed

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