HELOC vs. Refinance vs. Second Mortgage: Which Option is Right for You?
Revised by: Jennifer Tucker
April 17, 2025
3 Min. Read
Tapping into your home’s equity through a refinance, second mortgage, or home equity line of credit (HELOC) can give you the flexibility to reach your goals, from paying off debt to funding major expenses to creating a financial safety net.
But with several options to choose from, it’s important to understand how each one works, and which best fits your needs. The choices you make now can have a lasting impact on your financial future. In this guide, we’ll explain the similarities and differences between a HELOC, a refinance, and a second mortgage and help you decide which one could set you up for long-term success.
What These Options Have in Common
Refinancing, second mortgages, and HELOCs all allow you to tap into the equity you’ve built in your home. In simple terms, equity is the difference between your home’s current market value and what you still owe on your mortgage. These lending options help you turn that equity into cash that can be used to meet financial goals or cover major expenses.
Each option has unique benefits and trade-offs—so the right choice depends on your financial situation and goals.
Understanding the Differences
| Loan Type | How It Works | Best For | Key Considerations |
| Refinance | Replaces your existing mortgage with a new one, ideally with a better rate or terms | Lowering monthly payments, reducing interest, or switching loan terms | Involves closing costs—best when current interest rates are lower than your existing loan |
| Second Mortgage | A new loan on top of your current mortgage, disbursed as a lump sum | Funding one-time expenses like home improvements or debt consolidation | You’ll have two monthly mortgage payments
Often a fixed interest rate |
| HELOC | A revolving line of credit based on your home’s equity—you borrow as needed during the draw period | Covering ongoing or variable expenses like tuition or medical costs | Variable interest rate—monthly payments can change and increase over time |
How to Choose the Right Option for You
The best choice depends on your goals. Here are a few questions to help guide your decision:
- Do you want to reduce your monthly mortgage payment or interest rate?
Consider refinancing.
- Do you need a one-time lump sum for a specific purpose?
A second mortgage might be a good fit.
- Do you want ongoing access to funds over time?
A HELOC gives you flexible borrowing for recurring or uncertain expenses.
- Are you comfortable with a variable interest rate?
HELOCs often come with variable rates that may change over time.
Still unsure? Talking with an experienced lender can help you understand the costs, benefits, and long-term impacts of each option based on your personal financial situation.
Check out our article on Smart Ways to Use Your Home Equity.
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Jennifer Tucker
Jennifer Tucker is a freelance writer for Marine Credit Union. She has held roles in banking, marketing, and public relations during her 15+ year career. She holds a bachelor’s degree in communication with a minor in journalism from the University of Portland and a master’s degree in communication from Marquette University.
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