Q: What is the difference between a HELOC and a second mortgage?

A home equity line of credit (HELOC) and a home equity loan are both ways to borrow against the equity of your home. A HELOC is an open-ended line of credit that allows you to borrow, repay and borrow again without reapplying. A home equity loan is a fixed-rate, closed-ended loan.

HELOC

• Revolving credit so you can draw funds when you need to and pay interest only on the amount drawn
• Variable interest based on the prime rate (current rate)
• Draw period–duration when you can access the credit line, followed by repayment period

Home equity loan

• Lump-sum loan
• Fixed interest rate
• No revolving credit feature, so you cannot borrow more funds once loan is disbursed