What Is a Home Equity Loan?
Second Mortgage Explained Simply
Last verified: April 2026
The one-sentence answer: A home equity loan (sometimes called a HEL) is a one-time lump-sum loan secured by the equity in your home. You pay it back in fixed monthly payments over a set number of years.
How it works, step by step
- You apply - You apply at a bank, credit union, or online lender. They check your income, credit score, and how much equity you have.
- The lump sum is paid to you - On closing day, you receive the full loan amount. The entire amount lands in your bank account at once.
- Fixed monthly payments begin - Starting the following month, you make equal monthly payments. The payment includes both interest and principal repayment.
- Fully paid off at end of term - At the end of your loan term (typically 10 or 15 years), the loan is fully repaid and the lien on your home is released.
Fixed rate and fixed payment - why that matters
The defining feature of a home equity loan is that both the interest rate and the monthly payment are fixed for the entire life of the loan. Your rate will not change whether the economy booms or contracts, whether the Federal Reserve raises rates or cuts them. You know on day one exactly what you will pay every month until the loan is gone.
This predictability is the core appeal of the home equity loan. Families who need to budget carefully tend to prefer it over a home equity line of credit (HELOC), which has a variable rate that can change from month to month.
April 2026 rates by term
| Loan Term | Average Rate (April 2026) | Monthly Payment on $50,000 | Total Interest on $50,000 |
|---|---|---|---|
| 5 years | 8.1% | $1,016/mo | $10,965 |
| 10 years | 8.2% | $610/mo | $23,238 |
| 15 years | 8.3% | $483/mo | $36,900 |
| 20 years | 8.5% | $434/mo | $54,100 |
Rates are national averages for April 2026. Your rate will vary based on credit score, CLTV, lender, and state. Consult a licensed mortgage professional.
Is a home equity loan the same as a second mortgage?
Yes. A home equity loan is a second mortgage in every practical sense. It sits behind your first mortgage as a second lien on your property. The phrases "second mortgage" and "home equity loan" are used interchangeably in the industry, though technically "second mortgage" is the broader legal term.
When a home equity loan makes sense
- You have a fixed contractor bid for a home renovation. You know exactly how much you need and you need it all now.
- You want to consolidate high-interest debt into a single lower-rate payment and you have the discipline not to rebuild the debt.
- You have a medical expense or other one-time cost that is well-defined.
- You prefer the security of knowing your payment will never change, regardless of what happens to interest rates.
When a home equity loan does not make sense
- When you are not sure exactly how much you will need. Borrowing $50,000 when you might only use $30,000 means paying interest on unused money from day one.
- When spending will be spread over many years (college tuition, ongoing renovation).
- When you want a safety net but not a commitment. A home equity line of credit (HELOC) has no cost until you draw.
- When you are considering bankruptcy. Turning unsecured debts into home-secured debt before bankruptcy is a serious legal matter. Get independent advice.