A home equity loan — often shortened to HELOAN — gives you a fixed amount of money up front, at a fixed interest rate, repaid in equal payments over a set term. It sits behind your existing mortgage as a second lien, so your first-mortgage rate never changes.
How a home equity loan works
Think of it as the mirror image of a HELOC. Instead of a revolving line you draw from over time, a home equity loan is a one-time lump sum. You know the amount, the rate, and the monthly payment on day one, and none of them change over the life of the loan. That predictability is the entire appeal for many homeowners — especially for a single, known expense.
Because it's a second lien, it leaves your first mortgage untouched. If you're sitting on a low first-mortgage rate you'd rather not give up, a home equity loan lets you borrow without refinancing the whole balance — the same core advantage a HELOC offers, but with fixed payments instead of a variable line.
The same Texas protections apply
A Texas home equity loan is a Section 50(a)(6) extension of credit, so it carries the full set of constitutional protections:
- Combined borrowing capped at 80% of the home's value.
- Certain lender fees capped at 2% of the loan amount (excluding discount points, appraisal, survey, and title).
- A 12-day waiting period before closing that can't be waived.
- In-person closing at a lender's office, title company, or attorney's office.
- A 3-business-day right of rescission after closing.
- Non-recourse — no personal liability except in cases of actual fraud.
Home worth $500,000, mortgage balance $300,000. Your combined liens can't exceed $400,000 (80%), so a home equity loan of up to about $100,000 may be possible — subject to appraisal, credit, income, and lender requirements. See your own number in the equity calculator.
Home equity loan vs. HELOC vs. cash-out refinance
All three are capped at 80% in Texas. The choice comes down to how you want to receive the money and whether you want a fixed or variable rate:
| Home equity loan | HELOC | Cash-out refinance | |
|---|---|---|---|
| Structure | Second lien, lump sum | Second lien, revolving | Replaces first mortgage |
| Rate | Usually fixed | Usually variable | New first-mortgage rate |
| Payout | Lump sum | Draw as needed | Lump sum |
| Payment | Fixed and predictable | Can change with rates | Fixed for the new loan |
| Best when | You want a set amount at a fixed rate | You want flexibility over time | Your current rate is high |
When a home equity loan is the right fit
A home equity loan is usually the cleanest choice when you have a single, defined expense and you value certainty: a specific renovation with a known budget, a one-time tuition bill, or a lump of higher-interest debt you want to consolidate into one steady payment. If your borrowing needs are open-ended, a HELOC may fit better; if your first-mortgage rate is already high, it's worth comparing a cash-out refinance.
Common uses
Texas homeowners most often use a home equity loan for debt consolidation, home improvements like a remodel or addition, roof and HVAC replacement, and education costs. The homepage shows more of the everyday reasons people tap their equity.
Worth remembering: a home equity loan is secured by your home, so consolidating unsecured debt into it trades a higher rate for the risk that the debt is now tied to your house. It can be a smart move — but it's one to weigh carefully, ideally with a professional who can look at your full picture.