Home Equity Loans

As a homeowner, one of your biggest assets is your home’s equity. Equity is the amount of your home that you own outright. This includes the amount you paid in cash up front (your down payment), plus the amount you pay toward your loan balance with your monthly mortgage payments. 

For example, if you owe $200,000 on your mortgage and your home is worth $300,000, you have $100,000 in equity.

Many homeowners build up their equity and utilize that as a down payment when it comes time to buy a new house. Others tap into their equity while they still live in the home for things like renovations, debt consolidation, education expenses, and more.

You can access your home’s equity a few different ways, including:

  • Home Equity Loan: Home equity loans allow homeowners to borrow a lump sum of money based on their equity. This loan type usually has a fixed interest rate and is repaid in regular installments over a specified period. Home equity loans are often referred to as “second mortgages.”
  • Home Equity Line of Credit (HELOC): With a HELOC, you’ll be given a credit limit based on your home’s equity, which you can draw from as needed. Unlike a home equity loan, a HELOC offers a variable interest rate. You will only pay interest on the amount you've withdrawn during the draw period (which can vary by program) before the loan goes into repayment for the remaining term of the loan.
  • Cash-Out Refinance: A cash-out refinance involves taking out a mortgage greater than the remaining balance on your current loan, using your equity as a cash advance. With this option, you will refinance your original mortgage loan into a new loan.

With each of these options, you will pay interest – but the rate and type (fixed or variable interest) depends on which loan option you choose. In any case, it can be helpful to learn more about mortgage interest rates and how they are potentially impacted by factors such as the prime rate.

what can I use a home equity loan for?

The funds from a home equity loan can be used for a variety of purposes, but it's important to use them wisely since your home serves as collateral for the loan. Here are some common uses for a home equity loan:

  • Home Improvements: Many homeowners use home equity loans to finance renovations or upgrades to their homes. This can include kitchen remodels, bathroom renovations, adding a room, or making energy-efficient improvements.
  • Home Repairs: If your home requires urgent repairs, such as a new roof or foundation repairs, a home equity loan can be a practical way to cover these costs.
  • Debt Consolidation: You can use a home equity loan to consolidate high-interest debt, such as credit card balances or personal loans. By doing this, you may lower your overall interest rate and simplify your monthly payments.
  • Education Expenses: Home equity loans can be used to cover education costs, such as tuition, books, and school-related expenses. This can be a cost-effective way to finance education compared to other borrowing options.
  • Emergency Expenses: In case of unexpected medical bills or other financial emergencies, a home equity loan can provide quick access to funds at a lower interest rate than credit cards or personal loans.

about Waterstone Mortgage’s home equity loan program

If you need a lump sum of money for a specific purpose — like a home renovation or to consolidate high-interest debt — but don’t want to refinance your current mortgage, a home equity loan may be a good fit.

benefits of choosing a home equity loan

  • No Impact on First Mortgage: One of the biggest benefits of choosing a home equity loan over a cash-out refinance is that it leaves your existing mortgage untouched. This may be preferable if you have a low interest rate on your primary mortgage that you want to retain.
  • Faster Access to Funds: Home equity loans typically have a quicker approval and funding process compared to a refinance, which can be beneficial if you need the money urgently.


home equity loan program details

  • Funds available in the form of a fixed-rate second mortgage
  • 15- or 20-year options available
  • Loan amounts up to $250,000
  • Financing available with primary residences or second homes
  • As low as 680 FICO
  • Debt-to-income (DTI) ratio up to 45%

cash-out refinance options

Did you know?
A cash-out refinance can be used for the same things as a home equity loan. However, there are a few benefits to choosing a cash-out refinance over a home equity loan or HELOC.

benefits of choosing a cash-out refinance

  • One Mortgage Payment — With a cash-out refinance, you replace your existing mortgage with a new one that includes the amount you want to cash out. This means you'll have only one mortgage payment to manage, simplifying your finances.
  • Larger Loan Amounts — A cash-out refinance may allow you to access a larger portion of your home's equity compared to home equity loans, which may have lower loan limits.
  • Lower Interest Rates — Cash-out refinancing often comes with lower interest rates compared to home equity loans or HELOCs.


All loan requests are subject to credit approval as well as specific loan program requirements and guidelines. Refinance requests are subject to credit approval as well as specific loan program requirements and guidelines. A Waterstone Mortgage professional can answer your questions and assist you in the application process should you choose to proceed.