HELOC vs Second Mortgage: Here's What You Actually Need to Know

Let's clear something up right now: A HELOC is a second mortgage.

Surprised? You're not alone. This is one of the most common confusions in home financing. People search "HELOC vs second mortgage" thinking they're comparing two different things. They're not.

Both HELOC and home equity loans are types of second mortgages. The real question is which type of second mortgage is right for you.

What Makes a "Second Mortgage" a Second Mortgage

A second mortgage is any loan secured by your home that comes after your primary mortgage. "Second" refers to lien position—if you default, your first mortgage gets paid before your second mortgage.

That's it. That's the definition.

Both HELOCs and home equity loans fit this definition. Both use your home as collateral. Both are subordinate to your primary mortgage.

The Two Types of Second Mortgages

Here's the real comparison you need:

HELOC: The Revolving Second Mortgage

A HELOC works like a credit card secured by your home. You get approved for a credit limit (say, $100,000), then draw what you need, when you need it.

During the draw period (typically 10 years):

• Borrow up to your limit
• Pay interest only on what you use
• Pay down and re-borrow as needed

Best for: Home renovations in phases, ongoing projects, emergency backup fund

Home Equity Loan: The Installment Second Mortgage

A home equity loan gives you one lump sum upfront. You pay it back in fixed monthly payments over a set term (often 10-20 years).

Best for: One-time expenses with known cost—debt consolidation, major renovation, large purchase

Which Second Mortgage Is Right for You?

Choose a HELOC if:

• You're not sure exactly how much you'll need
• You want flexibility to draw and repay
• Your project will happen in phases
• You're comfortable with variable rates

Choose a home equity loan if:

• You know the exact amount you need
• You want predictable monthly payments
• You prefer a fixed interest rate
• You're using funds all at once

The Rate Factor

Right now, HELOCs average about 7.25% while home equity loans average 7.56%. But that comparison isn't apples-to-apples:

• HELOC rates are variable—they move with the prime rate
• Home equity loan rates are fixed—they stay the same for the life of the loan

If rates rise, your HELOC payment rises. A home equity loan's payment never changes.

Why This Confusion Matters

Understanding that both are second mortgages helps you make better decisions:

1. Risk is the same - Both put your home on the line as collateral
2. Qualification is similar - Both require equity, good credit, and income verification
3. The real choice - Revolving credit vs. fixed loan, not "HELOC vs second mortgage"

The Bottom Line

Stop comparing HELOC to "second mortgage." They're the same thing.

The real question is: Do you want a revolving second mortgage (HELOC) or an installment second mortgage (home equity loan)?

At HonestCasa, we help you figure out which type makes sense for your situation—no jargon, no confusion. See your personalized options →

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FAQ

Is a HELOC the same as a second mortgage?

Yes. A HELOC is a type of second mortgage. So is a home equity loan. Both are loans secured by your home in second lien position behind your primary mortgage.

What are the two types of second mortgages?

HELOCs (revolving credit lines) and home equity loans (fixed lump-sum loans). Both are second mortgages—the difference is how you access and repay the money.

Which is better: HELOC or home equity loan?

Neither is universally better. HELOCs offer flexibility for ongoing expenses. Home equity loans offer predictability for one-time costs. Your situation determines which fits.