Home equity loan. One lump sum, one fixed payment.
A home equity loan is a second mortgage that pays you one lump sum and is repaid at a fixed rate over a set term, while your first mortgage stays exactly as it is. How much you can borrow depends on your equity, credit and the lender. Lower credit scores are considered on select programs, usually with less leverage.
Most of the homeowners who call us about equity right now have the same problem: a first mortgage at a rate they will never see again, and a reason to borrow. Refinancing the whole balance to get at the equity would be expensive. A home equity loan sits behind that first mortgage, prices only the new money, and gives you a payment that does not change. We place it with whichever lender in our network fits your credit and your property.
Who it's for
A fit if you're…
Holding a low-rate first mortgage you do not want to refinance
Facing one known cost: a renovation, a tuition bill, a roof
Paying off higher-rate credit cards or personal loans
Wanting a payment that will not move with the Prime Rate
Rebuilding credit and turned away by a bank on score alone
First mortgage untouched
Your existing rate, balance and term stay as they are. Only the new money is priced.
Fixed rate, fixed term
Equal monthly payments from the first month to the last. No draw period and no payment shock.
Lower credit considered
Select programs consider lower scores, generally with lower combined loan-to-value and higher pricing.
Valuation without a full appraisal
On some smaller loans, lenders use an automated or desktop valuation instead of an inspection.
Funds paid where you need them
Payoffs to creditors can be sent directly at closing when the loan is used to clear balances.
Placed, not sold
8Twelve is a broker. We compare second-lien programs across our 40+ network rather than selling one bank's product.
How a home equity loan works
The lender values the home, adds your current mortgage balance to the new loan, and checks that the total stays under its combined loan-to-value cap. If it does, you receive the full amount at closing and start repaying it in equal monthly installments of principal and interest. There is nothing to draw later and nothing to convert. Terms commonly run from 5 to 30 years, and a shorter term means a higher payment but far less interest.
Illustrative example only
Round numbers, chosen to show the math rather than to reflect any particular lender or file. Your figures, program and pricing will differ.
Illustrative home equity loan sizing on a $500,000 home
Home value
$500,000
Lender combined cap (85% in this example)
$425,000
Existing first mortgage balance
$280,000
Maximum home equity loan
$145,000
Amount the borrower actually takes
$60,000
Borrowing less than the maximum keeps a cushion of equity and usually improves pricing. The first mortgage at $280,000 is not touched.
For illustration only. Not a commitment to lend, a rate lock or an offer of credit. Terms vary by lender, by property and by file.
A lower score does not end the conversation; it changes the structure. Lenders that consider lower credit generally lower the combined loan-to-value they will go to and price the loan higher. What moves the decision is everything around the score: how much equity is left after the loan, whether your first mortgage has been paid on time for the last twelve months, your debt-to-income ratio, and whether the credit damage is old or recent. A file with a modest score, strong equity and a clean recent mortgage history can place well. The same score with thin equity and a recent late payment is a much harder file.
Expect a lower combined loan-to-value cap than a strong-credit file
On-time mortgage payments over the last 12 months carry real weight
Paying down revolving balances before applying can lift the score quickly
Recent bankruptcy or foreclosure has waiting periods that vary by lender
Using the loan to clear high-rate cards often improves the debt-to-income picture
Illustrative example only
Round numbers, chosen to show the math rather than to reflect any particular lender or file. Your figures, program and pricing will differ.
Illustrative effect of a lower combined loan-to-value cap
Item
Strong credit (85% cap)
Lower credit (75% cap)
Home value
$500,000
$500,000
Combined cap
$425,000
$375,000
Existing first mortgage
$280,000
$280,000
Maximum home equity loan
$145,000
$95,000
Same home, same first mortgage. The lower cap still leaves $95,000 available, which covers most renovation and payoff plans.
For illustration only. Not a commitment to lend, a rate lock or an offer of credit. Terms vary by lender, by property and by file.
Some lenders will value the home without sending an appraiser, using an automated valuation model or a desktop review. This is most common on smaller loan amounts, lower combined loan-to-value and standard single-family homes with plenty of recent sales nearby. It saves time and the appraisal fee. A full appraisal is still the norm for larger loans, higher leverage, rural or unusual properties, and files where the automated value comes back lower than expected. We tell you which path your file is likely to take before you pay for anything.
Three ways to borrow against the same equity, and the right one depends on the rate you already have and how you will spend the money. A home equity loan suits a single, known cost and a borrower who wants a payment that never changes. A HELOC suits spending spread over months or years, like a phased renovation, because you only pay interest on what you draw. A cash-out refinance makes sense when your current first-mortgage rate is no better than what you would get today, so replacing it costs nothing. The cash-out refinance calculator shows the refinance side with your own numbers. If the goal is clearing high-rate balances, our cash-out for higher-rate debt page walks through all three for that purpose.
Home equity loan compared with a HELOC and a cash-out refinance
A home equity loan is underwritten much like a small mortgage. Expect to document income, assets and the existing first mortgage. Self-employed and want to skip tax returns? Some second-lien programs qualify on bank statements instead. For the full set of plain-English explainers, see the mortgage guides.
Recent pay stubs and W-2s, or tax returns if self-employed
Your current first-mortgage statement
Homeowners insurance and, where relevant, HOA details
Photo ID and recent bank statements
Credit, with lower scores considered on select programs
A home equity loan is secured by your home. Missing payments puts the home at risk, the same as on a first mortgage.
Two mortgage payments instead of one. Budget for both before you borrow.
Borrowing to the lender's maximum leaves little cushion if values soften. Taking less is often the better structure.
If you sell or refinance the first mortgage, the home equity loan is usually paid off or must be subordinated.
Credit minimums, combined loan-to-value caps and valuation methods vary by lender and file. Terms are available across our lender network, and nothing here is a commitment to lend.
FAQ
Questions buyers actually ask
Can I get a home equity loan with low credit?+
Often, yes. Lower credit scores are considered on select programs across our lender network, usually with a lower maximum combined loan-to-value and higher pricing than a strong-credit file. Equity, a clean recent payment history on your first mortgage and a manageable debt-to-income ratio all help offset the score.
Is a home equity loan a fixed rate?+
Almost always. A home equity loan is paid out as one lump sum and repaid in equal monthly payments at a fixed rate over a set term, which is the main difference from a HELOC, whose rate usually moves with the Prime Rate.
Can I get a home equity loan with no appraisal?+
Sometimes. On smaller loan amounts and lower combined loan-to-value, some lenders value the home with an automated valuation model or a desktop review instead of a full appraisal. Larger loans, higher leverage and unusual properties generally still need an inspection. We check which route your file fits before you pay for anything.
Can I use a home equity loan to pay off higher-rate debt?+
Yes, and it is one of the most common uses, especially when your first mortgage has a low rate you want to keep. The lump sum pays off the higher-rate balances, sometimes directly at closing. Our cash-out for higher-rate debt page compares this with a cash-out refinance in detail.
How much can I borrow with a home equity loan?+
Lenders cap the combined loan-to-value: your first mortgage plus the new loan, divided by the home's value. Multiply the value by the lender's cap and subtract what you owe. The cap depends on credit, occupancy, loan size and the lender, so the same home can support different amounts at different lenders.
What is the difference between a home equity loan and a HELOC?+
A home equity loan gives you the full amount up front at a fixed rate with a fixed payment. A HELOC is a revolving line you draw from as needed, usually at a variable rate, with interest-only payments allowed during the draw period. The loan suits a known, one-time cost; the line suits spending spread over time.
Is a home equity loan better than a cash-out refinance?+
When your first mortgage rate is lower than what a new first mortgage would cost, a home equity loan usually wins, because it prices only the new money and leaves the low rate alone. When your current rate is similar to or higher than today's market, a cash-out refinance can make more sense. Compare both on total cost.
Can I get a home equity loan on a second home or rental?+
On select programs. Fewer lenders offer second liens on non-owner-occupied property, and the ones that do usually allow less leverage. Our HELOC for investment property page covers second homes and rentals.
What are the closing costs on a home equity loan?+
Usually lower than on a full refinance, because the loan is smaller, but they vary widely: some lenders charge an origination fee, title and recording costs, and a valuation fee, while others absorb part of them for a higher rate. Your loan estimate shows every fee before you commit.
What are home equity loan rates right now?+
We do not publish rates. Pricing on a home equity loan depends on credit, combined loan-to-value, loan amount, term, occupancy and the lender, and it changes with the market. A soft-credit fit check shows you real numbers for your file.
Is the interest on a home equity loan tax deductible?+
It can be, when the money is used to buy, build or substantially improve the home that secures the loan. Using it for other purposes generally does not qualify. Ask a tax professional about your own situation.
See what your equity supports.
A 3-minute application. A soft-credit rate estimate. We structure and place your file with the lender that fits it.
