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Summer is a popular season for real estate investments, particularly vacation and second homes. Whether you’re buying a lakeside retreat or a mountain escape, tapping into your home’s equity can be a powerful financing strategy. But what’s better—a Home Equity Line of Credit (HELOC) or a Home Equity Loan? Understanding their differences is key to choosing the right one for your summer property acquisition.
A Home Equity Line of Credit (HELOC) is a revolving line of credit that uses your home’s equity as collateral. Much like a credit card, it allows you to borrow money as needed up to a set limit.
A Home Equity Loan, also known as a second mortgage, gives you a lump sum of money upfront, repaid in fixed monthly installments over a set period.
Feature | HELOC | Home Equity Loan |
Disbursement | Revolving line of credit | Lump sum |
Interest Rate | Variable | Fixed |
Repayment Structure | Interest-only (draw), then principal | Principal + interest immediately |
Flexibility | High | Low |
Best For | Ongoing or unpredictable expenses | One-time, large expense |
Yes. Both can be used as a down payment on a second property, but some lenders may have restrictions. It’s best to consult your mortgage advisor to ensure compliance with their terms.
No. These loans are separate from your primary mortgage. However, both increase your total debt, which can impact your credit and future loan eligibility.
Interest on home equity financing may be tax-deductible if the funds are used to buy, build, or substantially improve the home securing the loan. Always consult a tax advisor to confirm your eligibility.
Using your home’s equity can be a smart way to make your summer property dream a reality. Whether you prefer the flexibility of a HELOC or the structure of a Home Equity Loan, the right financing strategy can help you maximize value while maintaining financial security.
Our advise is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.