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Home Equity

Can You Have a HELOC and a Home Equity Loan?

A home equity line of credit (HELOC) and a home equity loan accomplish the same goal. They allow you to borrow against a portion of your home’s equity while you own the property—even if you owe on your mortgage.

A HELOC provides an open-ended line of credit you can pull from as needed, while a home equity loan gives you a lump sum you repay over a set time. Most HELOCs come with a variable interest rate that can change over time, while home equity loan rates are often fixed.

But can you have both at the same time? Yes—in some cases, you may even be able to use one product to refinance the other at a lower interest rate. 

Can I take out a home equity loan and HELOC on the same property?

Yes, eligible borrowers can have a home equity loan and a HELOC on (and secured by) the same property, allowing them to borrow funds beyond the first equity-based loan and even secure a lower interest rate or better terms.

It can also provide more flexibility, especially if they take out a home equity loan first and later prefer to draw from a HELOC as needed. Whether this is an option for you will depend on several factors, including your:

  • Property value
  • Credit score
  • Income
  • Debt-to-income ratio (DTI)

You’ll also need to decide whether you should take out a second home equity debt against your property. If one product meets all your needs—such as a HELOC with an available credit limit and time remaining in the draw period—both might be unnecessary.

Weigh these potential benefits and drawbacks to determine if taking out two home equity debts is the right choice for you:

Borrow additional fundsTaking on extra debt
Potential for lower interest rateAdditional credit hit
Potential for better termsSecond monthly payment
Access newly established equityHigher DTI

Why your property value matters

Your home’s current market value will determine how much equity you have in the property and how much you can borrow. Expressed as the loan-to-value ratio (LTV), this number demonstrates how much you owe on the home compared to what it’s worth.

Many lenders set LTV limits of 70% to 90%, depending on location and creditworthiness. A home’s LTV is especially important if you want to take out a second home equity debt against the property.

For example, imagine you own a home worth $350,000, and you no longer have a mortgage on the property. Your starting LTV, in this case, is 0%, with $350,000 in home equity. 

Calculation(Balance / Value) x 100 = LTV
Loan balance$0
Market value$350,000

Now say you take out a home equity loan for $200,000. To find your new LTV, we divide your $200,000 loan balance by your home’s value, then multiply by 100. This brings your LTV to 57.1%.

Calculation(Balance / Value) x 100 = LTV
Loan balance$200,000
Market value$350,000

You still have $150,000 in available equity, but remember that you can only borrow up to your lender’s LTV threshold. If you later decide to open a HELOC, your lender may not allow you to borrow the full $150,000.

However, suppose your lender’s maximum combined LTV (CLTV)—the total of all liens on a property divided by its market value—is 85%. To find how much you can borrow with an added HELOC, first calculate the maximum total debt your lender will allow:

CalculationValue x CLTV limit = maximum total liens
Market value$350,000
CLTV limit0.85
Max. total liens$297,500

Then, subtract your current home equity loan balance from your maximum allowable debt. This gives you the total amount of secondary home equity debt you can borrow.

CalculationMax. total liens – Current loan balance = Tappable equity
Max. total liens$297,500
Current loan balance$200,000
Tappable equity$97,500

In this case, you may be able to take out a line of credit for up to $97,500, in addition to your home equity loan.

Does it matter whether I’ve paid off my mortgage or still owe?

The keys to taking out a second home equity product are always the remaining equity available and the lender’s LTV limits. As long as your LTV is within those limits, you can have a home equity loan and HELOC on the same property while still paying on your mortgage.

Imagine you own a property worth $350,000 and owe $220,000 to your original mortgage lender. This gives you a starting LTV of 62.8% and $130,000 in home equity. You take out a home equity loan for $50,000, bringing your CLTV to 77.1%.

CalculationCurrent loan balance / Market value x 100 = CLTV
Current loan balance$270,000 ($220,000 + $50,000)
Market value$350,000

You have $80,000 in remaining equity, which you want to withdraw using a HELOC. But lenders won’t let you borrow against 100% of that. (That’s why it’s important to know your lender’s maximum CLTV.)

In this example, say your lender allows for a CLTV of up to 85%. How much you can borrow with a HELOC will be the difference between your current CLTV—77.1%—and your lender’s 85% threshold. To find your HELOC limit, start by calculating your maximum total liens:

CalculationMarket value x CLTV limit = Maximum total liens
Market value$350,000
CLTV limit0.85
Max. total liens$297, 500

Next, calculate your total tappable equity. Keep in mind that your tappable equity will be less than your available equity.

CalculationMax. total liens – Current loan balance = Tappable equity
Max. total liens$297,500
Current loan balance$270,000
Tappable equity$27, 500

You’re still able to open a HELOC alongside your mortgage and home equity loan, but how much you can borrow is limited to $27,500.

Note that CLTV is just one factor lenders consider when you apply. Your approval is subject to other factors, including your credit score, income, and DTI.

Will my rates be higher if I take out both a home equity loan and HELOC on the same property?

Taking out a home equity loan and a HELOC on the same property can result in much different interest rates between the two products and different costs for each type of debt.

The more outstanding obligations, new accounts, and debt balances you have, the riskier you may appear. For these reasons, lenders may offer you a higher interest rate on the second home equity product than the first.

This isn’t guaranteed, however. Several factors influence your interest rate—which is the cost to borrow against your home equity—including:

  • The lender
  • Which product you take out
  • Where you live
  • How much you borrow
  • Your credit score
  • The property’s LTV
  • Your DTI
  • Market conditions

When you take out your first loan—whether it’s a HELOC or a home equity loan—your lender will consider the factors we mentioned above. Your home mortgage loan can affect these factors to an extent.

However, taking out a second line of credit is different in your lender’s eyes because it potentially poses a greater risk.

You’re already using a portion of your home’s equity to secure your first home equity account, in addition to your primary mortgage. This puts the next home equity lender in the third position. If you default, it may have a tougher time recouping losses.

Going into the application process with an existing home equity debt can also be different from a credit standpoint. Your mortgage and/or first home equity debt can affect your:

  • Credit score (by reducing it)
  • Credit report (multiple hard credit inquiries will show up)
  • Household debt obligation (debt-to-income ratio)
  • Remaining available equity based on your home’s current market value

All of this combined can result in a higher rate on your second home equity product, so be prepared for that possibility. Still, you don’t have to accept the first interest rate you’re offered.

The lower your interest rate, the less you’ll pay over the life of your home equity debt. Prequalify with and compare rates from four to five lenders to give yourself the best chance at reducing your interest expense.

Variable vs. fixed rates on HELOCs and home equity loans

Many HELOCs have variable interest rates. While your lender’s variable introductory rate may be competitive, be aware it’s subject to change. If market rates increase, so can your variable HELOC’s rate, resulting in additional out-of-pocket costs. (Note that certain lenders offer fixed-rate HELOCs.)

Home equity loans, by contrast, are often fixed-rate products, though certain lenders offer variable rates. These fixed rates may be higher at first, but they provide you with a predictable overall cost and monthly payment.

Can I have a home equity loan and HELOC with the same lender?

The best place to start your search for a second home equity lender is often your current lender. Since you have a history with that lender, the process might be more straightforward—and you might be more likely to get approved. 

If your lender offers both products (several offer only one or the other), you may be able to use your new home equity loan or line of credit to refinance the first one.

For example, if you have a variable-rate HELOC and want a fixed rate that cannot increase, your lender may be willing to let you roll your HELOC debt into a fixed home equity loan.

Even if you meet your existing lender’s credit and home equity requirements, it’s still worth shopping around before signing on the dotted line. This can help you find the lowest rates and best terms, save money, and access more of your home’s equity.

Can I have a home equity loan and HELOC on multiple properties I own?

If you own more than one property, you may be able to take out multiple home equity loans and HELOCs, even against the same property. Ask yourself the following questions before you do.

How is the property used? 

Some home equity lenders will allow you to borrow against a second property if you use it as a secondary home or vacation property. If you own an investment rental, commercial property, or select other types of homes, many lenders won’t let you borrow against them with a home equity loan or line of credit.

What type of property do you want to borrow against? 

Most lenders limit the types of properties they’ll approve to single-family homes, condominiums, townhomes, and even multifamily properties (up to four units), particularly if they are owner-occupied. Mobile homes, manufactured homes, and co-ops are often excluded.

How have your other home equity loans and lines of credit affected your DTI and credit score? 

Borrowing money affects your credit in multiple ways, resulting in:

  • Hard credit inquiries
  • Higher credit usage
  • Lower average age of accounts
  • Higher DTI

If your existing HELOC or home equity loan is recent, it could lower your credit score. Additionally, the higher your DTI, the less you may be able to borrow with a new home equity product—and the higher your interest rate, in many cases.

If you can’t take out a HELOC or home equity loan on your additional properties, you can tap into your available home equity in other ways. Perhaps the simplest is a cash-out refinance

This means you refinance your mortgage into a new loan with new terms. However, the lender issues the new loan for more than you owe your current lender and gives the difference to you in cash. 

So if you owe your lender $80,000 on a $200,000 property, you may be able to get a cash-out refinance for $130,000, pulling an additional $50,000 in cash out of the home. This gives you a new LTV of 65%. Depending on your lender and cash needs, your borrowing limits may be higher or lower. 

Cash-out refinance amount$130,000
Amount to pay off first mortgage$80,000
Cash in hand$50,000

Note: A cash-out refinance results in an increased mortgage balance. Referencing the example above, your mortgage balance would increase from $80,000 to $130,000.

If you’re unclear on the differences between a HELOC and a home equity loan, read our resource on the topic. You can also compare a cash-out refinance to a home equity loan.