A second mortgage that gives you a lump sum borrowed against your home equity. Fixed rate, fixed payment, fixed term — like a regular mortgage, just smaller and secondary.
A home equity loan is a second mortgage. You borrow a lump sum against the equity in your home, get a fixed interest rate, and pay it back over a fixed term — usually 5 to 30 years. It's also called a "second mortgage" because it's secured by the same home as your primary mortgage but sits in second position behind it.
Compared to a HELOC: the home equity loan is simpler. Fixed rate (no variable surprises), fixed payment, fixed term. You get the full amount up front, all at once. The trade-off is you can't re-borrow what you've paid back like you can with a HELOC.
Best for one-time, defined expenses where you know exactly how much you need: a major renovation, paying off high-interest debt, college tuition.
Example
You have $200K in equity. You take out a $75K home equity loan at 8.25% over 15 years to renovate your kitchen and pay off credit cards. Fixed monthly payment of about $727 for 15 years. No surprises.
Also known as
second mortgage, home equity installment loan, HEL