In short
A home equity loan or HELOC lets you borrow against your home's equity in second position while your existing first mortgage stays in place. A home equity loan is a fixed lump sum; a HELOC is a revolving line you draw from as needed. The minimum credit score is 600.
Reviewed by Scottie Campbell, NMLS #1610726 · Last updated October 18, 2026
What's the difference between a home equity loan and a HELOC?
Both let you borrow against your home's equity in second position, behind your existing first mortgage, so that first loan and its terms stay in place. A home equity loan gives you one lump sum with a fixed rate and a set payment, which fits a defined cost like a fixed-price renovation. A HELOC is a revolving line you draw from as needed, usually with a variable rate, and during the draw period you pay interest only on what you use. On the programs I work with, the minimum credit score is 600, with 680 needed above a 45% debt-to-income ratio and 720 for lines over $500,000.
Key takeaways
You've built equity in your home, and now you have a goal for it. A home equity loan or HELOC lets you borrow against that equity without replacing the first mortgage you already have. I'm Scottie Campbell, a Mortgage Advisor and the founder of Waymaker Mortgage Company, and I'll walk you through both options, show you the total cost of each, and help you pick the one that fits how you'll actually use the money.
Your Equity, Your Strategy
A lot of homeowners I talk with in Georgetown, TX have the same situation. They've built real equity, they have a first mortgage they're happy with, and they have a goal: a kitchen that finally works, a pool, paying off a stack of card balances, or the down payment on a rental. The question is how to get to that equity without disturbing the loan they already have.
That's what a home equity loan or HELOC does. It sits in second position behind your first mortgage. Your first mortgage stays exactly as it is, same balance, same terms, same rate you already locked. You borrow only the slice of equity you need.
My job is to educate and empower you. Your job is to decide. So let me walk you through how these work and how I think about them.
Home Equity Loan vs. HELOC
Both borrow against your equity. They just deliver the money differently.
- Home equity loan: one lump sum at closing, a fixed rate, and a set repayment term. You know your payment from day one. It fits a defined cost, like a fixed-price renovation contract or a one-time debt payoff.
- HELOC (home equity line of credit): a revolving line you draw from as you need it, usually with a variable rate. During the draw period you pay interest only on what you've actually used. It fits phased projects, ongoing costs, or a reserve you want available but may not touch.
| Feature | Home Equity Loan | HELOC |
|---|---|---|
| How you receive funds | Lump sum at closing | Draw as needed |
| Rate structure | Fixed | Usually variable |
| Payment | Set from day one | Based on what you've drawn |
| Best fit | One defined cost | Phased or ongoing needs |
| Effect on first mortgage | None | None |
Quite frankly, neither one is better in general. The better one is the one that matches how you'll actually spend the money.
What You'll Need to Qualify
Here is where the lines are drawn on the programs I work with:
- Minimum credit score of 600 for a home equity loan or HELOC
- 680 or higher if your debt-to-income ratio is above 45%
- 720 or higher for lines over $500,000
- Enough equity left in the home after the new loan is added to your first mortgage (lenders look at the combined balance against your home's current value)
- Income and debts documented so the new payment fits your budget
If you're under one of those marks today, that's not the end of the conversation. It's never a no. It's always a how. Sometimes the how is a different structure, and sometimes it's a short Mortgage Action Plan to get your score or debt ratio where it needs to be. Can't do it now doesn't mean can't do it ever.
Smart Ways Homeowners Use Their Equity
- Renovations and home improvement: updates, additions, a pool, or repairs you've been putting off
- Debt consolidation: rolling card or personal loan balances into one payment secured by the home (I'll be straight with you about the trade-off of putting your house behind that debt)
- Investing: funding the down payment on a rental, then pairing it with a DSCR loan on the new property
- Buying your next home: using equity for a down payment on a move-up purchase, combined with a Greenlight Approval so your offer is as strong as possible
- A safety net: an open HELOC you don't draw on until life throws you a curveball
HELOC vs. Cash-Out Refinance: A Total Cost Analysis
The most common question I get is whether to take a HELOC or do a cash-out refinance. A cash-out refinance replaces your entire first mortgage with a new, larger one. A home equity loan or HELOC leaves the first mortgage alone and adds a smaller second loan.
What that means for you is that the right answer depends on the whole picture, not one number. I run a Total Cost Analysis that looks at what each option costs over the time you plan to own the home: closing costs, how long you'll carry the balance, how fast you plan to pay it down, and how each payment fits your budget. Sometimes the second loan wins. Sometimes the refinance wins. I kinda like the HELOC strategy for homeowners who need a moderate amount, plan to pay it back over a few years, and want to leave a first mortgage they're happy with untouched.
As for pricing: your rate depends on your scenario and the day's market. Reach out and I'll price it for real.
A Related Option: Principal First Loan
For some borrowers, I also offer a Principal First Loan, which is a first-lien HELOC. It replaces a traditional first mortgage with a line of credit for primary and second homes. It requires a 700 minimum credit score and 10% down. It isn't for everyone, but for disciplined borrowers with steady cash flow it's worth a conversation.
Working With Me
You're talking to the owner of this company. I've been in mortgage since 2003, and I invest in real estate myself, so I've used my own equity the same way many of my clients want to use theirs. At Waymaker Mortgage Company, we run high-tech, high-touch: fast online tools on the front end, and a real person who picks up the phone and explains the tradeoffs.
If you're in the Georgetown area or anywhere I'm licensed in Texas, Florida, Pennsylvania or Ohio, feel free to text me. We'll look at your equity, your goal and your budget, and build a plan that makes sense. Here to serve.
Information on this page is general and educational. It is not a commitment to lend or an offer of credit. Programs, guidelines and eligibility change and depend on your full scenario. Waymaker Mortgage Company, NMLS 2440476. Equal Housing Lender.
Quick facts
- Minimum credit score
- 600 (680 above 45% DTI; 720 for lines over $500,000)
- Loan types
- Home equity loan (lump sum) or HELOC (revolving line)
- Rate structure
- Home equity loan fixed; HELOC usually variable
- Effect on first mortgage
- None; your existing loan stays in place
- Borrowing basis
- Combined loan balances against your home's current value
- Related option
- Principal First Loan (first-lien HELOC, 700 minimum, 10% down)
Is this loan right for you?
Who it's for
- Homeowners who want to access equity without replacing their current first mortgage
- Owners funding a renovation, pool or major repair
- Borrowers consolidating card or personal loan balances into one payment
- Investors using equity for the down payment on a rental property
- Homeowners who want a line of credit available as a reserve
Who it may not fit
- Owners with little equity built up in their home yet
- Borrowers who aren't comfortable putting their home up as collateral for a new loan
- Anyone whose budget can't comfortably absorb another monthly payment
Pros and cons
Pros
- Leaves your existing first mortgage and its terms untouched
- Choose a fixed lump sum or a flexible draw-as-needed line
- With a HELOC, you pay interest only on what you draw during the draw period
- Can fund renovations, debt payoff, investing or a down payment
- An unused HELOC can sit ready as an emergency reserve
Trade-offs to weigh
- HELOCs usually have variable rates, so the payment can change
- Your home secures the loan, which raises the stakes if your income changes
- Adds a second monthly payment on top of your first mortgage
Frequently asked questions
Will a HELOC change my first mortgage?
No. A HELOC or home equity loan is a separate loan in second position. Your first mortgage keeps its balance, terms and rate. You're only adding a new loan against part of your equity.
What credit score do I need for a home equity loan or HELOC?
On the programs I work with, the minimum is 600. If your debt-to-income ratio is above 45%, you'll need 680 or higher, and lines over $500,000 need 720 or higher. If you're not there yet, I'll help you build a Mortgage Action Plan to get there. Can't do it now doesn't mean can't do it ever.
Is a HELOC fixed or variable?
HELOCs are usually variable, so the payment can move over time. A home equity loan has a fixed rate and a set payment. If predictability matters most to you, the fixed loan may fit better. Your rate depends on your scenario and the day's market. Reach out and I'll price it for real.
Should I do a HELOC or a cash-out refinance?
It depends on how much you need, how long you'll carry it and how you feel about your current first mortgage. A cash-out refinance replaces your whole loan; a HELOC adds a second one. I run a Total Cost Analysis on both so you can see the cost over the time you plan to own the home, then you decide.
Can I use home equity to buy an investment property or my next home?
Yes. Many investors use a HELOC on their primary home for the down payment on a rental and pair it with a DSCR loan on the new property. If you're buying your next home, we can combine your equity plan with a Greenlight Approval so your offer is as strong as possible.
Do I pay anything on a HELOC I'm not using?
During the draw period you generally pay interest only on what you've drawn, so an unused line typically carries no interest. Some programs have fees, so I'll walk you through the specific draw and repayment terms before you commit.
Related loan programs
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Last updated October 18, 2026 · Reviewed by Scottie Campbell, NMLS #1610726. This page is educational and not a commitment to lend; program details change — ask for current figures.