HELOC and Home Equity Loans in California

You have built up equity in your home, and you need some of it for a remodel, a tuition bill, or debt that costs you too much every month. A HELOC, short for home equity line of credit, lets you borrow against that equity without touching the mortgage you already have. A home equity loan does the same job but pays you the whole amount at once. We are a mortgage brokerage, and we compare both across a network of 100+ wholesale lenders.

How a HELOC Works

If you do not know the final cost of your project yet, a line of credit fits better than a lump sum. During the draw period you borrow what you need, when you need it, and you usually pay interest only on what you have drawn. When the draw period ends, the repayment period starts, and you pay down principal and interest until the balance is gone. Most HELOCs carry a variable rate: a published benchmark called an index, plus a fixed markup the lender calls the margin. When the index moves, your payment moves with it.

How a Home Equity Loan Is Different

If you know the exact number, say a contractor's signed bid, a fixed home equity loan is often the calmer choice. You get the full amount at closing, the rate is fixed, and the payment stays the same every month until the loan is paid off. You give up the freedom to draw as you go. In return, you never wonder what next month's payment will look like.

How Much You Can Borrow With a HELOC

Your limit comes down to how much of the house you already own. Lenders use a number called combined loan to value, or CLTV: your first mortgage balance plus the new equity loan, divided by what the home is worth. Each lender picks its own CLTV ceiling, and it drops on second homes and rentals compared with the home you live in. Your credit score and income move it too, which is why we check several lenders instead of one.

HELOC vs a Cash Out Refinance

If you are torn between a HELOC and a refinance, start with the rate on your current mortgage. A cash out refinance replaces your first mortgage with a new, larger one, so your whole balance moves to today's rate. A HELOC leaves the first mortgage alone and adds a smaller second loan behind it. When your existing rate is low, keeping it usually matters more than anything else on this page.

When a HELOC Is the Wrong Answer

If today's rates are lower than the rate on your first mortgage, a HELOC is probably the wrong tool. Refinance instead, take the cash in the same loan, and end up with one payment rather than two. The same goes if you need most of your equity at once and expect to carry the debt for decades, because a variable payment can climb a long way over that stretch. And if you are 62 or older and would rather not add a monthly payment at all, compare a reverse mortgage first.

Common Uses for a HELOC

Most people use a HELOC to pay for home improvements or to clear credit cards and other higher interest debt. If you are self employed and qualify better on deposits than on tax returns, ask about pairing a HELOC with bank statement income, which some of our lenders accept. Investors often draw on equity for the down payment on a rental, then finance that purchase with a DSCR loan that qualifies on the property's rent. Whether the interest is tax deductible comes down to how you spend the money, so check with a tax professional.

Not sure which one fits? Tell us what the money is for and we will line up the HELOC and home equity loan options side by side. You can also check your monthly payment first with our mortgage calculator.