HELOC vs. mortgage: what's the difference?
A mortgage buys the home with a fixed loan; a HELOC is a variable-rate credit line against equity you already have. Rates, payments, risks and when each fits, with 2026 numbers.
The short answer
A mortgage is a loan used to buy or refinance a home, usually with a fixed rate and a fixed payment over 15 or 30 years. A HELOC (home equity line of credit) is a revolving credit line secured by equity you already have, usually with a variable rate tied to the prime rate, interest-only payments during a draw period, and then repayment (CFPB). For the week of October 22, 2026 the average 30-year mortgage rate was 7.32% (Freddie Mac); the prime rate that HELOCs track was 7.00% (Federal Reserve, Oct. 20, 2026).
Key numbers
- Mortgage
- Lump sum, usually fixed rate
- HELOC
- Credit line, usually variable
- Lien position
- HELOC usually 2nd behind the mortgage
- 30-yr average (Freddie Mac)
- 7.32%
Side by side
| Mortgage | HELOC | |
|---|---|---|
| Purpose | Buy or refinance a home | Borrow against equity you already have |
| How you get the money | One lump sum at closing | Draw as needed up to a limit, repay and draw again |
| Rate | Usually fixed (adjustable options exist) | Usually variable, prime rate plus a margin |
| Payments | Principal and interest from month one | Often interest-only during the draw period, then principal and interest |
| Lien | First lien | Usually a second lien behind the mortgage |
| Closing costs | Typically 2% to 5% of the loan | Often lower; some lenders charge annual or inactivity fees |
Payment example
A $300,000, 30-year mortgage at 7.32% costs about $2,061 a month in principal and interest. A $60,000 HELOC at 8.50% (prime 7.00% plus a 1.50-point margin, an example margin) costs about $425 a month interest-only during the draw period. When repayment starts, the HELOC payment jumps because principal is added; the HELOC payment calculator shows by how much.
When each makes sense
- Mortgage: buying a home, or refinancing when today's rate is lower than yours.
- HELOC: you have a low-rate first mortgage you want to keep and need money over time (renovations, tuition) or as a backup line. See why many owners keep a low rate and use a HELOC.
- Cash-out refinance instead: when your current rate is close to or above today's, one new loan can be simpler. Compare in cash-out refinance vs. HELOC.
Risks to understand
Both are secured by your home, so missing payments can lead to foreclosure. A HELOC's variable rate means payments rise when the prime rate rises, and a lender can reduce or freeze a line under the terms of your agreement. For the HELOC versus a fixed-rate home equity loan, read HELOC vs. home equity loan.
Frequently asked questions
Is a HELOC a mortgage?
Yes, in the legal sense: it's secured by your home, usually as a second mortgage. But it works like a credit line rather than a one-time loan.
What is the difference between a HELOC and a mortgage?
A mortgage is a lump-sum loan to buy or refinance, usually at a fixed rate. A HELOC is a revolving line of credit against your equity, usually at a variable rate with interest-only payments at first.
Are HELOC rates higher than mortgage rates?
Usually, because HELOCs are second liens. HELOC rates track the prime rate (7.00% on Oct. 20, 2026) plus a margin, while the 30-year mortgage average was 7.32% (Freddie Mac, October 22, 2026).
Can you have a HELOC and a mortgage at the same time?
Yes. That's the most common setup: the mortgage is the first lien and the HELOC is a second lien.
Should I get a HELOC or refinance?
If your current mortgage rate is well below today's, a HELOC usually costs less because you keep the low rate. If your rate is near or above today's, a cash-out refinance may be simpler.