HELOC vs Home Equity Loan — Variable Revolving Credit vs Fixed Lump Sum
Compare a revolving HELOC against a fixed Home Equity Loan. See which option delivers the better blended rate for your equity.
HELOC Calculator
Variable revolving line of credit secured by equity
What it measures: Interest-only draw period payments and fluctuating variable rate risk.
Use when
- Flexible spending over time for ongoing projects
- Preserving low first mortgage rate while drawing capital as needed
Limitations
- Variable prime rate risk
Blended Rate Mortgage Calculator
Combines first mortgage with second fixed-rate loan
What it measures: The true combined fixed rate across your first mortgage and new fixed home equity loan.
Use when
- One-time major expense requiring payment predictability
- Eliminating prime rate reset risk
Limitations
- Pay interest on the full balance from day one
Key Difference
HELOC offers variable flexibility. Home equity loans offer fixed stability.
Worked Numerical Example
Scenario
$50,000 borrowed against $250,000 3.5% mortgage.
HELOC at 8.5% initial variable rate = 4.33% blended rate
Home Equity Loan at 8.0% fixed rate = 4.25% fixed blended rate
Mathematical Interpretation
The fixed home equity loan locks in a guaranteed blended rate.
The Bottom Line
Choose a HELOC for flexible draw needs; choose a fixed home equity loan to eliminate rate reset risk.