Many or all companies we feature compensate us. Compensation and editorial research influence how products appear on a page. Home Equity HELOCs First-Lien HELOC: How It Works, When It Makes Sense, and Top Lenders Updated Jun 23, 2025 6-min read Expert Approved Expert Approved This article has been reviewed by a Certified Financial Planner™ for accuracy. Written by Rebecca Lake, CEPF® Written by Rebecca Lake, CEPF® Expertise: Student loans, mortgages, home-buying, credit, debt, personal loans, education planning, insurance, investing, small business Rebecca Lake is a certified educator in personal finance (CEPF®) and freelance writer specializing in finance. Learn more about Rebecca Lake, CEPF® Reviewed by Crystal Rau, CFP® Reviewed by Crystal Rau, CFP® Expertise: Equity compensation, oil & gas investments, education planning, investment planning, student loan planning, retirement Crystal Rau, CFP®, CRPC®, AAMS®, is a certified financial planner based out of Midland, Texas. She is the founder of Beyond Balanced Financial Planning, a fee-only registered investment advisor that helps young professionals and families balance living their ideal lives and being good stewards of their finances. Learn more about Crystal Rau, CFP® Tapping into your home equity can be a smart way to manage large expenses, but not all home equity products work the same way. If you’re mortgage-free, or thinking about replacing your mortgage, one option might stand out: a first-lien HELOC. This lesser-known strategy can help you access equity, pay down high-interest debt, or even refinance your mortgage. But it’s important to understand how a first-lien HELOC works, how it differs from second-lien options, and what to watch out for before committing. Table of Contents What is a first lien? Pros and cons First vs. second lien How to get a first-lien HELOC Best lenders Can a first-lien HELOC help you tap more equity? Is a first-lien HELOC a smart move? FAQ What is a first-lien mortgage? Can a HELOC be in the first-lien position? Is a HELOC considered a subordinate lien? What is a first lien? A lien represents a legal claim to property that’s associated with a debt. When someone takes out a mortgage to buy a home, the lender is in the first-lien position. If the borrower defaults on the mortgage, the lender can initiate foreclosure proceedings to take the home back. Second-position liens also represent a legal claim to property that’s used to secure a debt. Ordinarily, a home equity loan or HELOC is considered a type of second lien or second mortgage. The difference matters because a second lien is subordinate to a first lien. So if a borrower defaults on a debt obligation, the creditor in the first-lien position takes priority for getting repaid. Pros and cons of a first-lien HELOC A first-lien HELOC can be a flexible and powerful financial tool, but it isn’t right for everyone. Here are several key advantages and drawbacks to consider: Pros Access to equity on flexible terms Like other HELOCs, first-lien options let you borrow as needed, often through checks, debit card, or transfers. Potentially lower interest rates First-lien HELOCs are typically considered lower-risk by lenders than second-lien loans, which may translate to better rates. One loan, one payment Replacing your mortgage with a first-lien HELOC streamlines your finances into a single monthly payment. Tax advantages If used to buy, build, or improve your home, interest may be tax-deductible. (Check with a tax advisor.) Cons Variable interest rates Many first-lien HELOCs have rates that can rise over time, increasing your monthly payments. Risk of foreclosure Because the HELOC is secured by your home, missed payments can lead to foreclosure—just like a traditional mortgage. Interest-only payments can be risky If you only pay interest during the draw period, you may face a large principal balance later on. Not offered by all lenders First-lien HELOCs are less common than traditional second-lien HELOCs, which may limit your lender choices. First-lien HELOC vs. second-lien HELOC While most HELOCs sit in second-lien position behind a primary mortgage, a first-lien HELOC replaces your mortgage entirely or becomes the only lien on your home. First-lien HELOCs offer the advantage of streamlining your debt into a single loan, often with lower rates. But they also come with more risk if your financial situation changes, especially if you rely on interest-only payments. Second-lien HELOCs are more common and allow you to access equity while keeping your original mortgage. However, they may come with slightly higher rates and tougher qualification requirements due to their subordinate lien status. How to get a first-lien HELOC There are two ways to get a first-lien HELOC: The first mortgage is paid off. If you already repaid your original mortgage in full, the home has no liens at this point, so a HELOC would be the only outstanding debt and thus the first lien on the home. This benefits you because you can draw against your equity as needed, and you may be able to deduct the interest they paid. Use the funds from the HELOC to pay off your mortgage. The HELOC would then become the first lien, replacing the mortgage and leaving you with just one monthly payment to make. In this case, you can replace your old mortgage with a new one at a potentially lower interest rate. You can draw against your home’s equity to cover expenses, and you might also get the benefit of a mortgage interest deduction. Best first-lien HELOC lenders Numerous lenders offer first-lien HELOCs, including banks, credit unions, and online mortgage lenders. When comparing lenders, it’s important to consider credit requirements, equity requirements, HELOC borrowing limits, and interest rates. Here’s how four of the best first-lien HELOC lenders stack up. Best Overall 4.9 View Rates Rates (APR) 6.70% – 14.65% Funding $20K – $400K Terms (Yrs.) 5, 10, 15, or 20 Min. Credit Score 640 4.9 View Rates Best Customer Reviews 4.8 View Rates Rates (APR) 6.99% – 15.49% Funding $5K – $250K Terms (Yrs.) 5, 10, 15, or 30 Min. Credit Score 640 4.8 View Rates Best Credit Union 4.7 View Rates Rates (APR) 7.75%+ Funding $10K – $1M Terms (Yrs.) 20 Min. Credit Score 670 4.7 View Rates Best Marketplace 4.5 View Rates Rates (APR) Varies Funding $10K – $2M Terms (Yrs.) 5 – 30 Min. Credit Score None 4.5 View Rates Can a first-lien HELOC help you tap more equity? Each lender determines how much you can borrow with a first-lien HELOC. Generally, lenders look for borrowers with a maximum loan-to-value ratio (LTV) in the 80% to 90% range, though some might bump that up to 95%. A first-lien HELOC could allow you to borrow more than a second-lien HELOC if your lender allows for a higher max LTV on that product. Here’s an example of how much equity you might be able to tap into if you’d like to replace your current mortgage with a first-lien HELOC: Home valueOutstanding mortgage debtLender’s max LTV (80%)$300,000$150,000$240,000 If you subtract the outstanding mortgage debt ($150,000) from your lender’s max LTV ($240,000), you’d have $90,000 of the HELOC left after paying off the first mortgage. Is replacing your mortgage with a first-lien HELOC a smart move? A first-lien HELOC can be an attractive tool to replace a primary mortgage, but before doing so, ask yourself: Is the HELOC interest rate more favorable? If so, paying off your mortgage with the HELOC could make sense. You’d still have the ability to draw on your remaining equity to use any way you’d like. And since you’d only have one loan, you’re not adding another mortgage payment to your monthly budget. Is the HELOC rate fixed or variable? A variable-rate option means monthly payments are less predictable. A significant increase in your HELOC payment could put a serious strain on your budget. Does the HELOC fit your budget? Since a first-lien HELOC is secured by your home, you accept the risk of losing your property if you default. So it’s important to determine where a first-lien HELOC might fit into your budget and what resources you’d have to fall back on to make loan payments if your job or income situation changes. Can you afford more than interest-only payments during the draw period? If not, you could face a large amount of principal left to pay down once the repayment period begins. A first-lien HELOC may not be the right choice for all homeowners, but the benefits it yields are valuable in certain cases. You can use a first-lien HELOC to refinance your primary mortgage while gaining flexibility from access to your equity. If you’re interested in a first-lien HELOC, we recommend shopping around for the best offers before moving forward. FAQ What is a first-lien mortgage? A first-lien mortgage is the primary loan used to buy your home. It has the first legal claim to the property, which means it gets priority in foreclosure situations. Can a HELOC be in the first-lien position? Yes. A HELOC can be in first position if it’s the only loan on the home or if it’s used to pay off an existing mortgage, making it the new primary lien. Is a HELOC considered a subordinate lien? Usually, yes—but if it becomes your only mortgage or pays off your primary mortgage, it becomes a first-lien HELOC.