Using Home Equity for Big Purchases: HELOC vs. Home Equity Loan

Using Home Equity for Big Purchases: HELOC vs. Home Equity Loan

Whether it’s paying for a degree, covering significant medical bills, buying a second property, or launching a new business – major expenses can require major funding. And if you’re a homeowner with equity, a HELOC or home equity loan can unlock access to cash at rates typically lower than credit cards or personal loans.

But which option fits your situation — a flexible HELOC, or a fixed home equity loan? Let’s break it down by common use cases and highlight what to consider for each.

Quick Comparison: Choosing the Right Loan for Major Expenses

HELOC: Flexibility for Evolving Costs

Best for: Expenses that may change or come in phases, like tuition payments over several semesters or business expenses that ramp up over time.

A Home Equity Line of Credit (HELOC) lets you borrow against your equity as needed. You’ll only pay interest on the amount you draw, and you can reuse the line at any time during the draw period.

Benefits:

• Flexible access over time

• Useful for staged or uncertain costs (e.g., tuition, startup capital, phased treatments)

• Often lower starting rates than credit cards or personal loans

Considerations:

• Variable rates can increase, raising monthly payments

• Requires discipline to avoid overborrowing

• Repayment phase can be more expensive

Tip: HELOCs shine when you don’t need all the funds at once. But keep rate fluctuations in mind and have a repayment plan in mind, before you start drawing.

Home Equity Loan: Fixed, One-Time Funding

Best for: Known costs – like a one-time tuition payment, medical procedure, down payment for an investment property, or business purchase.

A home equity loan gives you a lump sum with a fixed interest rate, typically repaid over 5 to 30 years. This works well if you know the exact amount you need and want payment predictability.

Benefits:

• Stable monthly payments and interest rate

• Easy to budget over time

• Works well for large, single-cost purchases

Considerations:

• You pay interest on the full loan amount, whether you use it all or not

• Closing costs apply

• Like any second mortgage, tapping your equity means putting your home on the line

Tip: Ideal for large, defined expenses like a medical procedure or business acquisition — especially when you want predictable repayment.

Equity Sharing Home Loans: When Lower Monthly Payments Are Key

Best for: High-cost goals and preserving monthly cash flow — important when starting a business or paying for long-term care.

An equity sharing home loan, gives you a fixed-rate, interest-only loan, with relatively low monthly payments upfront. In exchange, you agree to share a portion of your home’s future value appreciation.

Benefits:

• Lower monthly payments than typical loans

• Interest-only during the loan term

• Doesn’t touch your existing mortgage

Considerations:

• You give up a portion of future home equity growth

• Loan must be repaid with appreciation share at sale or refinance

• May not make sense if you plan to keep your home long-term

Tip: A good fit when large funding is needed and you want to conserve cash now, especially helpful for business startups or high medical costs.

How To Choose The Right Fit?

When you’re considering tapping into home equity to help fund a major purchase, the best option often depends on how (and when!) you plan to use the funds. Here’s how each option lines up with some of the most common big-ticket expenses homeowners face:

Paying for College or Education Costs If you’re covering tuition over several semesters, a HELOC gives you the flexibility to borrow only what you need, when you need it. If you’re paying upfront for a full program, a home equity loan offers the predictability of fixed monthly payments.

Covering Medical Expenses For unexpected or ongoing medical bills, a HELOC provides adaptable access to funds as new costs arise. If preserving cash flow during recovery is important, an equity sharing loan with lower monthly payments can provide relief, especially for high-cost surgeries or treatment plans.

Starting a Business Launching a business can come with large startup costs and uncertain cash flow in the early stages. A HELOC may be ideal if expenses will roll in over time. If minimizing monthly obligations is a priority, an equity sharing loan can offer access to capital without high payments early on.

Buying a Second Property or Investment Real Estate When you need a lump sum for a down payment or renovation on a second home or rental property, a home equity loan gives you immediate funding and a fixed repayment plan, which can be helpful for budgeting and planning return on investment.

Handling Unexpected Large Expenses When life throws a curveball — like a legal issue, family emergency, or urgent repairs — a HELOC gives you the freedom to access cash quickly without needing to define the exact cost up front.

Big Expenses Require Smart Strategy

Funding a major purchase is a big decision, and your loan choice should reflect your priorities:

• Need flexibility? A HELOC offers phased access over time.

• Prefer predictability? A home equity loan gives fixed costs and stability.

• Want to preserve monthly cash? Equity sharing may offer breathing room.

Just be sure to think beyond the short-term — consider your repayment horizon, financial goals, and how much home equity you’re comfortable putting at risk.

At Unison, we’re here to help you choose wisely. From flexible HELOC offerings to interest-only equity sharing options, our team can help you access up to 90% of your home’s equity (up to $500,000) — with no usage restrictions, no prepayment penalties, and FICO-friendly qualification starting at 640+. Whether you're growing a business, covering medical costs, or investing in education, we’re here to help you find a smart way forward.

Disclaimer: This content is for informational and educational purposes only and does not constitute financial, legal, or lending advice. Loan terms and availability vary by lender and state. Consult a qualified financial professional or lender for personalized guidance tailored to your situation. Unison HELOC and Unison HELOAN are powered by SpringEQ and are not underwritten by Unison Mortgage Corp. 

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