Home Equity Line of Credit vs Home Equity Loan (Pros & Cons)

Mortgage and Lending with AmeriFirst Financial Inc, San Diego, CA NMLS 259027

What is the difference between a Home Equity Line of Credit (HELOC) and a Home Equity Loan (HEL) and why does it matter? In short, both mortgage loan programs are designed to be Junior Liens (to go into 2nd Lien position behind a 1st mortgage).


Home Equity Line of Credit (HELOC) - is a revolving line of credit. Many refer to a HELOC as a credit card on steriods due to the fact that it acts in the same manner as a credit card, but with much higher credit limits and payments oftentimes.

  • Pros - flexibility, the feeling of having a "money tree" to pick from in a pinch, only being charged on the balance owed when utilizing the money in different phases (such as home improvements that do not all take place simultaneously), interest-only payment option (to allow more monthly cash-flow when desired)
  • Cons - Adjustable Rate Mortgage (ARM) can and will change over time, credit limit may be retracted (reduced) at any time the Lender desires (this trend happened to thousands of Homeowners across the country when the housing crisis occurred in/after 2017 and property values decreased), interest-only payment option (mentioned again for a reason...the "con" in this case is that Homeowners often become accustomed to this low payment, yet are unaware that they are not actually reducing the principal loan balance when making this payment and/or that at some point the Lender will want the principal paid...resulting in higher monthly payments in the future)


Home Equity Loans (HEL) - can suitably be described as a mini-mortgage with FIXED payments over a specified period of time (oftentimes +/- 15 years)

  • Pros - Fixed Interest Rates, predictable monthly payments
  • Cons - no flexibility to re-use the money after you pay down principal, no ability to reduce scheduled monthly payment amounts even when a higher-than-required monthly payment is made on any given month, higher interest rates than traditional 1st mortgages


When determining whether to pursue a Home Equity Line of Credit (HELOC) or a Home Equity Loan (HEL) or even an option of a Cash-Out 1st Mortgage, I recommend understanding the concept of a weighted average (aka blended average). 

Additional strategies exist, which I am always happy to elaborate.  Please feel free to contact me for any residential mortgage information, quotes, clarifications, and/or strategies, including the difference between Home Equity Lines of Credit (HELOC) and Home Equity Loans (HEL).

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For more information on topics like this, please feel free to visit www.GordonMortgage.com (an educational resource for Borrowers, Real Estate Agents, and Financial Professionals). Educational content provided by:


Jason E. Gordon

Branch Manager | Sr. Mortgage Loan Officer



Gordon Mortgage Group - AmeriFirst Financial Inc.


Office: 619-200-8031

Email: jgordon@amerifirst.us



11440 W. Bernardo Court, Ste. 300, San Diego, CA 92127


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AmeriFirst Financial Inc., 1550 E. McKellips Road, Suite 117, Mesa, AZ 85203 (NMLS #145368) Toll free phone (877) 276-1974. Copyright 2012. All rights reserved. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates, and programs are subject to change without prior notice. All products are subject to credit and property approval. Not all products are available in all states or for all loan amounts. Other restrictions and limitations may apply. AmeriFirst Financial is required to disclose the following licensing information. Please click here for licensing information. 




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debt consolidation
home equity loan
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Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

I will bookmark this post and share with others. Thank you for sharing 

Feb 02, 2019 05:44 PM #1
Deepak Chauhan
Versailles Property - Irvine, CA
Irvine, CA ... the place to be

Jason, I like your blogs, very useful info. Thx

Feb 02, 2019 07:44 PM #2
Jason E. Gordon
AmeriFirst Financial Inc, San Diego, CA - San Diego, CA
Sr. Loan Officer, CMPS, CDLP, RCS-D, CDPE, CMHS

Thank you Deepak Chauhan, please feel free to share these blogs with your valued clients if/when desired.

Feb 03, 2019 12:15 PM #3
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Jason E. Gordon

Sr. Loan Officer, CMPS, CDLP, RCS-D, CDPE, CMHS
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