HELOC alternatives: 8 options to compare before borrowing

A home equity line of credit (HELOC) lets you borrow your equity as a revolving credit line, but it’s not the best fit for every goal or budget. Before you commit your home as collateral, compare eight HELOC alternatives – from fixed-rate home equity loans and cash-out refinances to unsecured personal loans and home equity agreements – so you can match the cost, risk, and repayment to your needs.¹ Rocket Mortgage currently doesn’t offer HELOCs, but we want you to understand all your borrowing options.

Key takeaways:

1. A HELOC isn’t the only way to tap your home’s equity. A home equity line of credit offers revolving access to your equity, but it may not be the right fit for every financial situation.
2. There are several alternatives to consider. Options include home equity loans, cash-out refinances, personal loans, credit cards, reverse mortgages, home equity sharing agreements, sale-leasebacks, and personal lines of credit – each with unique features and requirements.
3. Every option has its own pros and cons. The right choice depends on your goals, timeline, and comfort with risk, so it's important to compare costs, eligibility, and long‑term implications before moving forward.

HELOC alternatives at a glance

8 HELOC alternatives in detail

Below are eight alternatives to HELOCs that let you tap into your equity, as well as how they work, and who they’re a good option for. This information is for educational purposes only and shouldn’t be considered financial advice.

1. Home equity loan                                                                                   

Home equity loans are a second mortgage where you borrow your home equity as a lump sum and repay it with a fixed interest rate.

How it works

A home equity loan allows you to keep your primary mortgage and borrow a lump sum that you repay with a fixed interest rate and predictable payments. You make payments on the home equity loan in addition to your primary mortgage payment.

You might want to do this if you want to keep your primary mortgage rate instead of refinancing into a new mortgage with a higher rate. The interest rate on a home equity loan typically is higher than your primary mortgage rate.

You can estimate your equity by using the home equity calculator from Rocket Mortgage.

Who it’s a good option for

Many homeowners finance home improvements, education costs, unexpected medical bills, investments, and more. While there are few restrictions on what you can use a home equity loan for, it’s wise to think carefully before spending on nonessential purchases, since the loan is secured with your home serving as collateral.

2. Cash-out refinance

A cash-out refinance replaces your current loan with a new one based on your home’s current fair-market value, and you keep what's left over after you pay off your current loan. When comparing a cash-out refinance vs. HELOC, it allows you to keep one mortgage, and you repay the equity you borrow as part of your monthly payment.

How it works

A cash-out refinance gives you a new primary mortgage with a higher balance. You must apply for a new primary mortgage, which will come with its own interest rate and loan term. You also must pay closing costs. You'll receive your money as a lump sum after closing.

Who it’s a good option for

It’s a good idea to compare your options using a blended rate calculation. If the interest rate you’ll receive by taking cash out is lower than the combined average you’d get if you had a second mortgage, taking cash out on your primary loan may make the most sense.

Beyond that, this option is good if you’re comfortable getting all your funding at once rather than using it over time for several projects.

3. Personal loan

A personal loan provides a lump sum, like a cash-out refinance or home equity loan. The difference when comparing a HELOC vs. personal loan is that the personal loan is unsecured.

How it works

A personal loan requires no collateral. Lenders approve personal loans based solely on creditworthiness. Because there is nothing for the lender to take if you end up defaulting on the loan, the interest rate will be higher than for a secured loan.

Who it’s a good option for

If you don’t need to borrow a large sum and don’t want to put your home up as collateral, a personal loan can be a good fit. You’ll need good credit and can expect to pay more interest than you would with HELOC rates.

4. Credit card

A credit card is a revolving credit line that lets you borrow, repay, and borrow again up to a certain credit limit. It offers a convenient way to make purchases online and in stores, and when used responsibly, it can help you build strong credit.

How it works

When you make a purchase with a credit card, the amount is charged to your account and reduces your available credit. You restore your available credit by repaying what you owe. If you don’t pay off your balance in full each month, you may be charged interest – often at a high rate.

Who it’s a good option for

Credit cards offer a revolving line of credit similar to a HELOC, but without the risk of losing your home. Because they’re typically unsecured, they pose less risk to your assets, though they usually have significantly higher interest rates.

5. Reverse mortgage

A reverse mortgage allows older homeowners with considerable equity to convert that equity into cash.

How it works

A reverse mortgage is designed for older homeowners who have significant equity in or own their home outright, making it a HELOC alternative for seniors. You can borrow your equity without needing to make payments to your lender. You can receive your loan as a lump sum, a line of credit, a series of payments, or any combination thereof.

To meet reverse mortgage requirements, you’ll need to show you can afford your property taxes and homeowners insurance, as well as maintenance, and any HOA fees.

The loan is repaid when the youngest surviving borrower or nonborrowing spouse no longer lives in the home. You have a few options for repaying a reverse mortgage:

• Sell the home. This works best if you don’t have heirs who want the home. If there’s anything left over after the sale, you or your heirs keep it.
• Refinance the home. If you or your heirs want to keep the home, you can either pay off the balance or refinance² the home to a standard mortgage for 95% of its appraised value or the balance of the reverse mortgage, whichever is less.
• Give the home to the lender. A reverse mortgage is a nonrecourse loan, meaning your heirs can't be held legally or financially responsible if they choose to give the home back to the lender.

Who it’s a good option for

Reverse mortgages are a good option for older homeowners with significant home equity and no need or desire to leave the home to their heirs.

6. Home equity sharing agreement

A home equity sharing agreement, aka a home equity investment or HEI, provides a lump-sum cash payment in return for a share of your home’s future value. When you sell the property, the investor receives a portion of the proceeds based on their agreed equity share.

How it works

Home equity sharing agreements have the benefit of not requiring a monthly payment. However, the downside is that if your home appreciates, you could end up owing a lot more than you received. As a result, these agreements can be both flexible and risky.

Who it’s a good option for

A home equity sharing arrangement is another way to tap the equity in your home without having to deal with a home loan.

7. Sale-leaseback

A sale-leaseback agreement, also known as a rent-back agreement, involves selling your property and renting it from the new owners. This is most often used on a short-term basis if you sell your existing home before finding a new home, but it could be used for a longer term in some scenarios.

How it works

A sale-leaseback is two transactions in one. First, you sell your property to an investor. Then the investor leases the property back to you under a long-term rental agreement, turning you into a tenant and them into your landlord. This way, you can sell your house without having to move.

However, you must keep in mind that you’re giving up ownership of the property and the equity and control that go with that.

Who it’s a good option for

A sale-leaseback may work for someone who needs to liquidate their home equity but doesn’t want to move.

8. Personal line of credit

A personal line of credit is a revolving credit line offered by banks and credit unions that works much like a credit card. The main difference is that it has two phases: a draw period and a repayment period.

How it works

During the draw period, you can borrow money up to a set credit limit and repay the debt to restore your available credit. Once the draw period ends, you enter a repayment period, during which you must pay off any outstanding balance along with interest. Personal lines of credit offer flexible financing but usually come with variable interest rates and fees that can drive up costs over time.

Who it’s a good option for

A personal line of credit might make more sense than a HELOC if:

1. You have an ongoing project for which you don't know the total cost
2. You don’t want to access your home equity
3. You don’t qualify for other types of equity lending products

Other HELOC alternatives to consider

Beyond the main options, there are a few specialized or situational tools that might fit your specific needs if you have insufficient equity or a low credit score.

401(k) loan

If you have built up a healthy retirement account, you can borrow from yourself. A 401(k) loan allows you to borrow up to 50% of your vested account balance, up to a maximum of $50,000, to be paid back within 5 years.

The best part? The interest you pay on the loan goes right back into your own retirement account. You also don’t need a minimum credit score, making this one of the easier HELOC alternatives for bad credit. However, there is a catch: if you leave your job, you must generally repay the entire loan balance by the next federal tax-filing deadline, or it will be treated as a taxable withdrawal and could trigger penalties.

Bridge loan

If you are selling your current home and buying a new one, a bridge loan can serve as a temporary financial safety net. A bridge loan vs. a HELOC comparison shows that a bridge loan is a short-term option (usually 6 to 12 months) designed specifically to fund the down payment on your new home before your current home sells. It is highly specialized and perfect for transitional home buyers.

Fractional ownership or partial sale of property rights

This unique option involves selling a fractional equity stake in your home or selling specific property rights – such as development rights or utility easements – to an investor or utility company. You receive an immediate cash infusion without taking on debt or monthly payments, though you do sacrifice a portion of your control or future profits from the property.

How to choose the best HELOC alternative

Finding the best HELOC alternatives for your family comes down to evaluating your personal goals, budget, and risk tolerance.

Compare interest rates and fees

Start by looking at the total cost of borrowing. Secured loans generally offer the lowest interest rates. Unsecured loans charge higher interest rates but save you money up front because they do not require appraisals or extensive closing fees. Always ask lenders for a full breakdown of their origination fees and closing costs.

Decide between secured and unsecured debt

Ask yourself how comfortable you are using your home as collateral. If you have a stable income and want the lowest interest rate possible, a secured option is highly cost-effective. However, if your income fluctuates or you want the peace of mind of knowing your shelter is never at risk, opting for an unsecured personal loan or credit card is the safer path.

Match the option to your repayment plan

Choose a borrowing structure that matches how you plan to use and repay the funds:

• For a one-time project with a clear budget, choose a lump-sum, fixed-rate option like a home equity loan or personal loan to keep your payments predictable.
• For ongoing, unpredictable costs, look for a revolving option like a personal line of credit or a credit card to enjoy maximum flexibility.

Consider long-term equity trade-offs

If you are considering a home equity sharing agreement or a reverse mortgage, consider how it will affect your wealth in the long run. To understand how much equity you have to work with, try using the home equity calculator from Rocket Mortgage to see how much money you can borrow with a HELOC or how much equity you have available. This can help you decide if tapping into your equity now aligns with your long-term retirement and inheritance goals.

FAQ

Here are some answers to common questions around HELOC alternatives.

Are there better options than a HELOC?

Whether an option is "better" depends entirely on your financial situation and borrowing goals. If you want a fixed interest rate and predictable monthly payments, a home equity loan or cash-out refinance is often a better choice. If you want to protect your home from collateral risk, an unsecured personal loan is a much safer alternative.

What is the monthly payment on a $50,000 home equity line of credit?

Your monthly payment depends on your current interest rate and whether you are in the draw period or the repayment period. During the draw period (which typically lasts 10 years), you may only have to make interest-only payments. At an 8% interest rate, an interest-only payment on a $50,000 balance would be about $333 per month. However, once the repayment period begins, you must pay both principal and interest, which will cause your monthly payment to rise significantly.

What is an HEA vs. HELOC?

A comparison between a home equity agreement (HEA) and a HELOC comes down to debt versus equity sharing. A HELOC is a bank loan that you must pay back in monthly installments with interest. An HEA is not a loan. An investment company gives you cash up front in exchange for a percentage of your home's future appreciation, meaning there are no monthly payments or interest charges.

What is the cheapest way to get equity out of your house?

The cheapest way to access your home equity depends on current market interest rates and how fast you can pay back the debt. If overall interest rates are low, a home equity loan or cash-out refinance is usually the most affordable option because they offer low rates. If you only need a small amount of money and can pay it back within a year, a credit card with a no-interest introductory APR is the cheapest option.

Can you take equity out of your house without refinancing?

Yes, you can easily access your home equity without refinancing your primary mortgage. You can do this by taking out a home equity loan, a HELOC, a home equity sharing agreement, or a reverse mortgage. These options allow you to keep your original first mortgage completely untouched, which is incredibly helpful if you currently have a low, fixed primary mortgage rate. If you already have a HELOC and want to change your terms, you can refinance a HELOC to get a better rate.

The bottom line: Find a HELOC alternative that works for you

Ultimately, while a HELOC can be a flexible way to tap into your home equity, it’s not the only option. From home equity loans and cash-out refinances to personal loans, credit cards, reverse mortgages, and innovative solutions like home equity sharing and sale-leaseback agreements, you have many borrowing options to choose from. The right choice depends on your goals, timeline, and risk tolerance.

To explore which best meets your needs, talk with a Rocket Mortgage Home Loan Expert. They can help you compare HELOC alternatives and find a financing solution that works for you.

¹Home Equity Loan Product is a second standalone lien and may not be used for piggyback transactions. Valid for loan amounts between $45,000.00 and $500,000.00 (minimum loan amount for properties located in Michigan is $10,000.00). Not available on Ameriprise products. Additional restrictions, terms, and conditions apply. This is not a commitment to lend.

²Refinancing may increase finance charges over the life of the loan.

This article is for informational purposes only and is not intended to provide financial, investment, or tax advice. You should consult a qualified financial or tax professional before making decisions regarding your retirement funds or mortgage.