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We do a lot of home equity loans and HELOCs across Texas, and the same confusion comes up constantly: people treat these two as interchangeable. They're not, and picking the wrong one for your situation can genuinely cost you. Sharing the plain-English version here — no pitch, just the stuff that trips people up.
Home equity loan — one lump sum, fixed rate, steady monthly payment. Best when you know your exact cost upfront (remodel with a firm quote, debt consolidation, etc.).
HELOC — a revolving credit line tied to your home, usually variable rate. You draw as needed over a set period. More flexible, but your payment can rise if rates move. Best for costs that arrive over time.
Short version: it's certainty vs. flexibility, not "which is better."
Texas-specific rules that catch people off guard:
Situations that change the answer entirely:
Not going to drop a link here since we know how the sub feels about that — but happy to answer specific questions in the comments. If you're weighing your own numbers, ask away and we'll give you a straight answer.
Home equity loan — one lump sum, fixed rate, steady monthly payment. Best when you know your exact cost upfront (remodel with a firm quote, debt consolidation, etc.).
HELOC — a revolving credit line tied to your home, usually variable rate. You draw as needed over a set period. More flexible, but your payment can rise if rates move. Best for costs that arrive over time.
Short version: it's certainty vs. flexibility, not "which is better."
Texas-specific rules that catch people off guard:
- 80% LTV cap — your total home debt can't exceed 80% of the home's value, with either option. Hard ceiling.
- No stacking — you can't hold a home equity loan and a HELOC at the same time.
- One per year — you can only tap your equity once every 12 months.
- 12-day waiting period — Texas law requires it before closing. No shortcuts.
- Primary residence only — not rentals or vacation homes.
Situations that change the answer entirely:
- Credit near 580 — a standard second-lien home equity loan gets tough. An FHA cash-out refinance is often the more realistic path.
- DTI above ~43% — you're not automatically disqualified; there are programs that go higher (FHA up to 57%, conventional up to 49.9%).
- Inherited home with an existing loan — you've generally got four options (refinance into your name, new home equity loan, buy out other heirs, or sell), each with its own timeline.
Not going to drop a link here since we know how the sub feels about that — but happy to answer specific questions in the comments. If you're weighing your own numbers, ask away and we'll give you a straight answer.
