Refinance vs. HELOC vs. Second Mortgage

If you want to access the equity you've built up in your home before your current mortgage term ends, there are three common paths: refinancing, a home equity line of credit (HELOC), or a second mortgage. Each works differently, and all typically offer lower interest rates than an unsecured loan or credit card, since they're secured by your home.

Refinancing

Refinancing replaces your existing mortgage with a new one, letting you access up to 80% of your home's appraised value minus what you still owe. For example, on a home worth $600,000 with $300,000 remaining on the mortgage, you could refinance up to $480,000 (80% of $600,000) — a further $180,000 above your current balance. Refinancing may change your rate and terms, and can come with fees.

Home equity line of credit (HELOC)

A HELOC works like a revolving line of credit secured by your home — borrow, repay, and borrow again up to your limit. Federally regulated lenders cap a standalone HELOC at 65% of your home's appraised value, or up to 80% when combined with your existing mortgage.

Second mortgage

A second mortgage is a separate loan from a different lender, secured against the same home, on top of your existing mortgage. Because your original lender gets paid first if you default, second mortgages are riskier for the lender — and typically carry a higher interest rate as a result.