 TITLE: Home Equity Loan vs. HELOC: What’s the Difference? CONTENT: Both home equity loans and HELOCs use the equity in your house as collateral—that is, the portion of your home's appraised value that belongs to you outright. To determine your equity if you're currently paying a mortgage on the house, you must find out from your lender how much you still owe on your mortgage, and deduct that amount from the appraised value of the home.\nFor example, let's say you took out a $300,000 mortgage on your house and you've paid down $100,000 so still owe $200,000 on the loan principal. In the meantime, property values in your neighborhood have climbed, and the appraised market value of your well-maintained house has increased to $350,000. Your equity in the house is its appraised value minus the unpaid mortgage amount: $350,000 - $200,000 = $150,000.\nYou typically cannot get a home equity loan or HELOC for the full amount of your equity in the house; lenders typically limit loan amounts to 75% to 80% of your total equity. If they're concerned you won't be able to repay the debt, they may insist on a smaller percentage of equity, or decline to issue you any loan at all, no matter how much equity you have. Continuing with the above example, with $150,000 in equity, your borrowing will be limited to between $112,500 and $120,000. END