HELOCs and Home Equity Loans in California

Why homeowners are using second mortgages right now

A lot of California homeowners have two things at once: a first mortgage with a rate they don't want to give up, and a lot of equity built up in their home. A cash-out refinance would replace that great rate. A second mortgage lets you leave your first loan alone and borrow against your equity separately.

HELOC vs. home equity loan: what's the difference?

A HELOC, or home equity line of credit, works like a credit card secured by your home. You get a credit limit, draw what you need when you need it, and pay interest only on what you've used. HELOC rates are usually variable, meaning they can go up or down.

A home equity loan, sometimes called a HELOAN, gives you one lump sum upfront with a fixed rate and a fixed monthly payment. It's predictable, which many people like for one-time expenses.

• Choose a HELOC if your costs will come in stages, like a remodel, or you want a flexible safety net.
• Choose a home equity loan if you know exactly how much you need and want a payment that never changes.

Popular ways to use home equity

• Kitchen and bath remodels, additions, or an ADU
• Paying off high-interest credit cards or personal loans
• A down payment on an investment property or second home
• College costs or major life expenses
• Bridge financing to buy your next home before selling this one

How much can you borrow?

Lenders look at your combined loan-to-value, or CLTV. That's your current mortgage balance plus the new second loan, divided by your home's value. Many lenders allow a CLTV up to around 80 to 90 percent, depending on your credit and the property. Your credit, income, and debt-to-income ratio also factor in.

Example: On a $1,000,000 home with a $500,000 mortgage, a lender allowing 85 percent CLTV could potentially approve up to $350,000 in a second mortgage, subject to qualifying.

Options for self-employed homeowners and investors

Traditional banks often want tax returns for a HELOC. As a broker, I can also access bank statement HELOCs and home equity loans for self-employed borrowers, plus second mortgages on some investment properties. See bank statement loans for how that qualification works.

Second mortgage or cash-out refinance?

If your current rate is low, a second mortgage often wins. If your current rate is high, a cash-out refinance might lower your overall cost. We'll run both side by side so you can see the blended cost, not just the headline rate.

Talk it through with Conor

Book a free 15-minute consultation with no credit impact and no commitment. Tell me what you're trying to accomplish, and I'll show you whether a HELOC, a home equity loan, or a refinance gets you there for less. Book your free consultation or call 925-708-7991.

HELOC and home equity FAQ

Will a HELOC change my first mortgage rate?

No. A HELOC or home equity loan is a separate second loan. Your first mortgage stays exactly as it is.

Are HELOC rates fixed or variable?

Most HELOCs have variable rates. Home equity loans usually have fixed rates. Some HELOCs let you lock a fixed rate on part of your balance.

How much equity do I need for a HELOC?

It depends on the lender's maximum combined loan-to-value, which is commonly around 80 to 90 percent. We'll calculate your available equity during your consultation.

Can I get a HELOC if I'm self-employed?

Yes. Bank statement HELOC and home equity loan programs let self-employed homeowners qualify without tax returns.

Is HELOC interest tax deductible?

Sometimes, depending on how you use the funds and your tax situation. Talk with your tax professional for advice specific to you.

Related loan programs

• Bridge Loans: Buy your next home before you sell

• Bank Statement Loans: Self-employed? Qualify on deposits, not tax returns

• Jumbo Loans: Financing above the conforming loan limit

The Loan Me Company (Loan Me, Co.) · NMLS #2497863 · CA DRE #02220434 · Conor Cappa, NMLS #1450916 · CA DRE #02100091. This is not a commitment to lend. All loans are subject to credit approval, income and property qualification, and lender guidelines. HELOC rates are typically variable and can change. Your home secures the loan. Examples are for illustration only. Contact us for a current rate quote. Equal Housing Opportunity.