Loan playbook / Home equity and secured borrowing
Know the next move. Without the bank speak.
HELOCs, cash out refinancing, debt restructuring, and using equity to help family with a down payment or closing costs. Borrowing against it creates a debt secured by your home.
Pick the tool
A HELOC, a home equity loan, a cash out refinance, and a rate and term refinance solve different problems. The right one depends on the first mortgage, the use of the money, and the rules on that property.
A home equity line of credit. A revolving line secured by the house. You draw what you need, pay it down, and can draw again during the draw period.
It can leave a good first mortgage in place. The payment can change, and the line is not a blank check.
Variable rate risk, draw fees, and a payment that can jump when the draw period ends.
What is the draw period, what happens after it, and does this house fall under Texas homestead rules?
A closed end second loan. One lump sum. A set repayment. No revolving balance.
You know the amount and the payment. Useful when the project has a real budget.
Closing costs and a second payment. Less flexibility than a line if the project changes.
Is the payment easier to live with than a line, once both liens are counted?
Replace the first mortgage with a larger one and take the difference in cash. On a Texas homestead this is a Section 50(a)(6) conversation, not a generic refinance.
One lien. One payment. Sometimes the clean way to restructure debt.
You give up the old first mortgage. If that rate was good, the new blended cost can be worse than a second lien.
What does the new loan cost compared with keeping the first mortgage and adding a second?
Replace the loan to change the rate or the term. The point is not to pull cash out.
It can lower the payment or shorten the term when the math works.
Closing costs. A lower payment from a longer term can still cost more interest.
How many months of savings does it take to earn the costs back, and will you keep the loan that long?
Family
A relative borrows against their house. The proceeds can be gifted toward a down payment or closing costs on someone else's purchase. The gift is not the mortgage. The buyer's loan still has to stand on its own.
One side is the equity loan on the family house. That can be a HELOC, a home equity loan, or a cash out refinance. The other side is the purchase loan. Conventional, FHA, and assistance programs each have their own gift rules.
Example: a parent takes a line against a paid down house and gifts part of the draw toward an eligible down payment. The parent owes the line payment; the recipient owes their purchase mortgage. A gift cannot carry an undisclosed repayment obligation. That is an example of the structure, not a statement that either loan is available.
Gift eligibility, sourcing, documentation, and the loan requirements vary by program and by lender. Some files need a gift letter. Some need statements from the donor. Some need the gifted money deposited before closing.
Before anyone moves money, confirm whose house is the collateral, whether that house is a Texas homestead, and whether the purchase program allows a gift at all.
Uses
Equity can pay off higher interest balances. The house is then securing debt that used to be unsecured. That can lower the monthly outflow and raise the risk on the house. Run the total cost, not just the payment.
A line or a lump sum can fund the work without replacing the first mortgage. A renovation loan rolls the work into the home loan instead. Bids and a real budget decide which one is worth reviewing.
People use equity as the cash for a down payment on a rental. The house payment does not go away because the rental might cover it later. Treat the equity loan as a real debt in the investment math.
Educational content updated October 9, 2026 · Lending reviewer approval pending · Not a commitment to lend.
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