 TITLE: Is Cash-Out Refinancing Better Than a Home Equity Loan? CONTENT: How Does a Home Equity Loan Work?\n---------------------------------\nA home equity loan is a type of second mortgage that you can take out in addition to your primary mortgage. There are also home equity lines of credit (HELOCs), which are similar, but give you a line of credit that you can borrow against rather than the entire loan amount upfront.\nWith a home equity loan, some lenders may allow you to borrow up to 85% to 90% of your home's value based on the combined loan-to-value ratio (CLTV), which takes the balance of your first mortgage and the home equity loan into account. Continuing with the figures above, if your home is worth $300,000, 90% of that is $270,000. If your current mortgage balance is $200,000, you may be able to get a home equity loan for $70,000.\nGetting a home equity loan may be quicker if the lender doesn't require an in-person appraisal, and some lenders cover the closing costs on the loan. Home equity loans also often have fixed rates and shorter terms than primary mortgages, but you'll be making monthly payments on both your home equity loan and original mortgage. If you fall behind on either loan, the lender may be able to foreclose on your home. END