When Coachella Valley homeowners think about upgrading their lifestyle—whether by building a pool, remodeling a kitchen, or consolidating high-interest debt—home equity often plays a central role. Lately, at MortgageWorks, we’ve seen a notable uptick in clients inquiring about fixed-rate second mortgages, also known as HEL loans, over the more flexible HELOC (Home Equity Line of Credit). Understanding the distinctions between these two options can help you make the most strategic financial choice for your home and future.
In a recent conversation with a homeowner who wanted to build a backyard pool, we explored both financing options. Because the project had a defined scope and cost, it made sense to present both a HEL loan and a HELOC—two tools that may look similar but operate very differently.
A HEL loan provides the full lump sum upfront at a fixed interest rate. It behaves much like a traditional mortgage: predictable payments over a set term, usually ranging from 10 to 30 years. In this homeowner's case, they had excellent credit and substantial equity, which allowed us to offer a 20-year second mortgage of $100,000 at a fixed rate of 7.6%. Given that many first mortgages today hover in the mid-6% range, this slight uptick for a second-position loan is very competitive.
On the other hand, a HELOC acts more like a credit card backed by your home. It's a revolving line of credit that you can tap into as needed, making it ideal for ongoing or unpredictable expenses. What makes a HELOC especially attractive today is its tie to the prime rate. Many of our partner lenders currently offer HELOCs at prime plus 0%—meaning rates can be as low as 7.5%, depending on your credit and loan-to-value ratio.
More homeowners are choosing HEL loans when they have a specific, one-time project in mind. Whether it’s building a pool, installing solar panels, or upgrading a kitchen, the benefit of receiving the full amount upfront with a stable monthly payment is hard to ignore. Especially in areas like Palm Desert, La Quinta, and Rancho Mirage—where property values have soared and homeowners are sitting on significant equity—a HEL loan can be a smart way to reinvest in your home without refinancing your low-interest first mortgage.
The stability of a HEL loan also appeals to those who want to avoid rate volatility. Unlike HELOCs, which adjust with prime rate movements, a HEL loan rate is locked in from day one. That means no surprises if the Federal Reserve changes course.
If your needs are more fluid—say you're planning multiple smaller improvements or want a cushion for future projects—a HELOC offers unmatched flexibility. Even better, as the Federal Reserve considers interest rate reductions, HELOC borrowers could benefit almost instantly. Unlike fixed mortgages, HELOC rates are directly tied to the prime rate, which adjusts in tandem with the Fed funds rate. If the Fed cuts rates by a quarter point, your HELOC rate goes down by the same amount right away.
This responsiveness makes HELOCs a strong option for financially savvy homeowners who anticipate rate cuts or want to avoid paying interest on funds they’re not yet using.
At MortgageWorks, we tailor every recommendation to your unique goals and financial profile. If you live in Coachella Valley and have been debating whether to tap into your home’s equity, now is an excellent time to explore your options. Whether you’re in Indio, Palm Springs, or Cathedral City, our local expertise ensures you get personalized guidance with rates and programs that make sense for our market.
If you’ve been thinking about building a pool, renovating your home, or even just setting up a rainy-day fund, don’t wait any longer. The market conditions are ideal for exploring HEL loans and HELOCs, and our team at MortgageWorks is here to help you compare them side by side.
Let’s talk about what works for your home, your budget, and your future—contact MortgageWorks today.
What credit score do I need to qualify for a HEL loan or HELOC?
Typically, lenders prefer a credit score of 680 or higher, though many programs are available for borrowers with scores above 620. The higher your score, the better the interest rate and terms you’ll receive.
Is a HEL loan better than a HELOC if I’m planning one large project?
Yes, a HEL loan is often the better choice for single, well-defined projects because it gives you all the funds at once with predictable payments.
How quickly will I see a rate change if the Fed lowers interest rates?
If you have a HELOC, the rate can change immediately after the Federal Reserve adjusts the Fed funds rate. That’s because most HELOCs are tied directly to the prime rate, which moves in step with Fed decisions.
Can I get a HEL loan without refinancing my current mortgage?
Absolutely. A HEL loan is a second mortgage, meaning it doesn’t replace your current mortgage. This is great news if you’re currently locked into a low interest rate and don’t want to disturb your existing home loan.
How much equity do I need to qualify for a HEL or HELOC?
Most lenders prefer that your total loan-to-value (LTV) remain below 85%, though this can vary. If your home is worth $500,000 and you owe $300,000, you likely qualify for a second mortgage up to $125,000, depending on other qualifications like credit and income.
We've been helping customers afford the home of their dreams for many years and we love what we do.
Company NMLS: 337037
www.nmlsconsumeraccess.org
777 E. Tahquitz Canyon Way, Suite 200-47
Palm Springs, CA 92262
Phone: 760-969-5023
Fax: 760-969-5024
art@mwloan.com
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