California HELOC & Home Equity Loan Programs

A HELOC (Home Equity Line of Credit) and a Home Equity Loan are two types of programs that may allow borrowers to access equity in a property. Advanced Funding Solutions is a mortgage brokerage that works with a network of wholesale lenders offering both program types across multiple investors.

HELOC vs. Home Equity Loan

A HELOC is generally structured as a revolving line of credit secured by the property, with a draw period followed by a repayment period. Most HELOC programs use a variable interest rate tied to an index plus a margin. A home equity loan is generally structured as a fixed-rate, fixed-term, one-time disbursement with predictable amortization. Specific structures, draw and repayment periods, rate indices, margins, and conversion features vary by funding lender and program.

How Much Equity May Be Accessible

Most HELOC and home equity programs allow borrowing up to a maximum combined loan-to-value (CLTV), which is the existing first mortgage balance plus the new second-lien balance divided by the property's appraised value. Maximum CLTV ratios are set by each funding lender and program and may vary by occupancy, property type, FICO, and loan amount. Investment-property programs generally allow lower maximum CLTV than owner-occupied programs. Where a borrower wants to consolidate the first mortgage and equity access into a single loan, a cash-out refinance may be reviewed as an alternative structure.

HELOC and home equity loan rates, points, and closing costs are determined by the funding lender at the time of application based on credit profile, CLTV, property type, occupancy, loan amount, and program. Rates change without notice and are disclosed in writing during the formal application process as required by state and federal law. Any rate or cost figures discussed before a complete application are illustrative only and are not a quote, rate lock, or commitment to lend.

Common Uses for HELOC & Home Equity Programs

Borrowers use HELOC and home equity loan programs for a variety of purposes, including home improvements, debt consolidation, education expenses, and other personal or investment uses. Self-employed borrowers who need to document income via deposits often pair a HELOC review with a bank statement program, and real estate investors sometimes tap equity to fund the down payment on a DSCR investor loan for the next rental acquisition. Tax deductibility of HELOC and home equity loan interest is governed by current IRS rules and depends on the use of funds; borrowers should consult a qualified tax advisor for guidance on their specific situation.