Home Equity Line of Credit vs Refinance

Written by True Tamplin, BSc, CEPF® | Reviewed by Editorial Team

Updated on December 13, 2022

A home equity line of credit, or HELOC, is a type of second mortgage, while a refinancing is where the terms of the existing debt are renegotiated. A refinancing pays off the existing mortgage and opens a new loan with new terms, whereas a HELOC leverages the equity in your home to open a line of credit.

Home Equity Line of Credit vs Cash Out Refinance

A home equity line of credit, or HELOC, is a type of second mortgage, vs a cash out refinance which replaces your existing mortgage with a new loan of a greater amount. The proceeds from that loan pay off your existing mortgage and the remaining funds go to you.

Home Equity Line of Credit vs Refinance FAQs

What is a line of credit?

A line of credit is money lent to an individual or business. If a line of credit is revolving, then the line of credit will replenish as the borrower pays back money borrowed.

What does LOC stand for?

The acronym LOC stands for Line of Credit.

What is a revolving line of credit?

A revolving line of credit is one which replenishes when the loan is paid off. An example of this is a credit card. A non-revolving line of credit closes once the loan is paid off, such as a student loan.

What's the difference between a line of credit and a loan?

A loan is typically a lump sum whereas a line of credit is typically revolving which allows for the borrower to draw, repay, and again draw as needed.

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.

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