# Home equity loan

> A home equity loan is a lump-sum second mortgage, usually at a fixed rate with equal monthly payments. How it differs from a HELOC, with a worked example.

URL: https://mortgage-math-us.com/glossary/home-equity-loan/  
Last reviewed: 2026-10-29 · By the MortgageMath US Editorial team

## Quick answer

**A home equity loan** is a second mortgage that pays you a lump sum against your home equity, usually at a fixed rate, repaid in equal monthly installments over a set term. Because your home secures it, falling behind can lead to foreclosure.

## Key facts

| Fact | Value | Source | As of |
|---|---|---|---|
| Right to cancel after closing (principal home) | 3 business days | [CFPB](https://www.consumerfinance.gov/ask-cfpb/can-i-change-my-mind-after-i-sign-the-loan-closing-documents-for-my-second-mortgage-or-refinance-what-is-the-right-of-rescission-en-186/) | Aug 8, 2024 |
| 30-year fixed average (basis of the example rate) | 7.24% | [Freddie Mac Primary Mortgage Market Survey](https://www.freddiemac.com/pmms) | Week of Oct 29, 2026 |

## Example

Borrow $40,000 for 10 years at an example fixed rate of 8.25% and the payment is $491 a month from the first month, with $18,873 of interest over the term. Your first mortgage keeps its rate and balance, which is the main reason to choose this over a [cash-out refinance](https://mortgage-math-us.com/glossary/cash-out-refinance/) when your current rate is low. The loan sits behind your first mortgage as a junior [lien](https://mortgage-math-us.com/glossary/lien/).

## Home equity loan vs HELOC

*Two ways to borrow against equity*

| | Home equity loan | [HELOC](https://mortgage-math-us.com/glossary/heloc/) |
|---|---|---|
| Money | All at once | Draw as needed |
| Rate | Usually fixed | Usually variable |
| Payments | Principal and interest from the start | Often interest-only during the draw period |

On your principal home you can cancel within 3 business days after closing. Interest is tax-deductible only when the money buys, builds or substantially improves the home that secures it — see [home equity interest and taxes](https://mortgage-math-us.com/home-equity/home-equity-interest-deduction/). The [home equity loan guide](https://mortgage-math-us.com/home-equity/home-equity-loan/) covers requirements and costs.

## Sources

- [Freddie Mac Primary Mortgage Market Survey](https://www.freddiemac.com/pmms) — 30-year fixed rate, national weekly average (Week of Oct 29, 2026)
- [CFPB](https://www.consumerfinance.gov/ask-cfpb/can-i-change-my-mind-after-i-sign-the-loan-closing-documents-for-my-second-mortgage-or-refinance-what-is-the-right-of-rescission-en-186/) — Right to cancel a refinance or home equity loan on your principal home (Aug 8, 2024)
- [CFPB: What is a home equity loan?](https://www.consumerfinance.gov/ask-cfpb/what-is-a-home-equity-loan-en-106/)
- [FTC: Home equity loans and home equity lines of credit](https://consumer.ftc.gov/articles/home-equity-loans-and-home-equity-lines-credit)

_General information, not financial advice._