What is home equity lending? When do you use it?

Home equity lending helps you borrow against the equity in your home. Because the home is used as collateral, the interest rate may be lower than interest rates for other loans. 

Taking on home equity lending is also called “getting a second mortgage.” 

What are the two types of home equity loans? 

You can get a home equity loan (HELoan) or a home equity line of credit (HELOC).  

A HELoan is best for expenses paid over time, like tuition payments or home renovations. 

A HELOC is best for a purchases requiring a fixed, lump sum, like medical bills or debt consolidation. 

When do people use home equity loans? 

Often, people seek this type of lending for debt consolidation — moving high-interest debt to lower-interest debt. 

Another common reason to get a HELOC is to fund home renovations, especially those that may increase your home’s value. Many homeowners look to this solution when high interest rates are an obstacle towards getting a new home. The goal is for the improvements to increase a home’s value, so the owners are in a better position to sell when the time comes (and enjoy home improvements in the meantime). 

The need to pay for medical, education or other family expenses is also a common reason to get home equity lending. 

How do I know a home equity loan is right for me? 

Before moving forward with a home equity loan, take these two factors into consideration: 

Make sure you’re prepared to make the loan payments. Make sure you’re comfortable with the monthly payment with interest and have a plan to pay it off on time. 

Don’t just look at what your payment is today. What are the short- and long-term impacts of your loan? Ask someone, like a Financial Solutions Guide at one of our branches, help you figure out what this decision means today, next year and four years from now. 

You can use our financial calculator to find out how much you could borrow.

The bottom line 

A home equity loan allows you to borrow against the equity you currently have in your home, with a variety of term options, and fixed and variable rates.  

Elevations offers HELOCs* to eligible members. Learn more on our website, contact us or visit a branch to talk through home lending options. 

*All offers of credit subject to credit, underwriting, approval and membership eligibility. All credit union rates, terms and programs are subject to change at any time. 

Learn more about HELOCs: 

Front Range landscaping tips to boost home value 

What is home equity lending? When do you use it?