This article was sponsored by Navy Federal Credit Union. Navy Federal Credit Union is federally insured by NCUA Equal Housing Lender.
For military families, tapping into home equity can be a smart way to finance renovations, consolidate debt, cover emergency costs, or fund educational expenses. There are two primary options: Home Equity Loans and Home Equity Lines of Credit (also known as HELOCs). It’s important to understand which fits your needs. This guide helps break it down so military households can make informed decisions.
What is a Home Equity Loan?
A Home Equity Loan is a fixed lump-sum loan you receive upfront, based on the equity in your home. It’s repaid over a set period (often 5–20 years) at a fixed interest rate, offering predictable monthly payments.
Best For:
- One-time expenses where you know the exact amount you need, such as a kitchen remodel, major appliance purchase, or consolidation of high-interest debt.
- Borrowers who want a predictable payment plan and rates, ideal when budgeting is key during deployments or PCS moves.
Pros:
- A fixed, predictable payment schedule
- A locked-in interest rate protects against market fluctuations
- Ideal for stable, one-time projects or expenses
Cons:
- Funds are distributed all at once, even if you don’t need the full amount
- No flexibility to borrow more unless you refinance or take out a new loan
- There’s a temptation to spend the funds unwisely, instead of on debt consolidation or renovations
What is a HELOC?
A Home Equity Line of Credit (HELOC) works like a revolving credit card secured by your home’s equity. You’re approved for a maximum credit limit (up to 95–100% of your home equity, depending on your lender’s qualification requirements), can draw as needed during the draw period (e.g., 10–20 years), and pay interest only on what you actually use. After the draw period ends, you begin the repayment phase, often with principal and interest payments.
Best For:
- Ongoing or variable expenses, such as phased renovation projects, tuition over multiple semesters, or maintaining a financial safety net during deployments.
- Borrowers who are comfortable with a variable interest rate and flexible repayment terms.
Pros:
- Flexible access to funds—only borrow what you need, when you need it
- Interest charges only accrue on amounts used
- Ideal for extended or unpredictable financial needs
Cons:
- Interest rate is usually variable and may fluctuate unpredictably
- Monthly payment can increase after the draw period or when the rate increases
- May be harder to plan fixed budgets
Side-by-side comparison
| Feature | Home Equity Loan | HELOC |
| Access to Funds | Single lump sum | Revolving line of credit |
| Interest Rate | Fixed | Variable |
| Monthly Payments | Fixed principal + interest | Interest-only during draw period |
| Best For | Known, lump-sum expenses | Ongoing or unpredictable expenses |
| Draw Period / Term | Fixed loan term (e.g., 5–20 years) | Draw period (e.g., 10–20 years) + repayment term |
| Payment Predictability | High | Moderate to low |
How to choose: Military family considerations
1. Define your needs
- If you have a clear, one-time expense (e.g., replacing a roof, consolidating credit card debt, or renovating), a Home Equity Loan offers clarity and stability.
- If you expect extended or uncertain costs over time, such as recurring school tuition, staggered home repairs, or emergency spending. A HELOC is a more flexible option.
2. Budgeting and predictability
Military families often operate on mindful budgets, especially during PCS transitions or deployments. A fixed mortgage-style payment is easier to manage when you’re deployed or managing finances from overseas. That’s why a Home Equity Loan can be attractive when stability is critical. By contrast, a HELOC requires more active management of payments and rates.
3. Deployment and PCS flexibility
- Home Equity Loans provide total funds upfront, so you don’t need to revisit the line of credit while deployed or in transit. Once closed, your payment plan remains consistent.
- HELOCs let you access cash over time, which can be valuable if you’re uncertain about exact costs or timing. But they require you to monitor and manage usage and rates, something harder to do from a deployed location.
4. Interest rate sensitivity
If you’re wary of rate volatility—especially with variable-rate products adjusting with market shifts—then the fixed rate of a Home Equity Loan may help guard against surprise spikes in your mortgage payment. On the other hand, if you can manage a flexible monthly payment and plan to pay off the line before or shortly after the draw period ends, a HELOC may be advantageous.
5. Loan fees and terms
Check lender policies for closing costs, prepayment penalties, and application fees. Some lenders (especially credit unions like Navy Federal Credit Union) waive many of these charges, making them more accessible and forgiving for military use.
Where to go for a Home Equity Loan or HELOC: Navy Federal Credit Union
For the best rates and military-oriented lending, check out Navy Federal Credit Union. Navy Federal offers both Home Equity Loans and HELOCs with no closing costs, no origination or application fees, and no prepayment penalties. Their products include:
- Home Equity Loan: Fixed-rate terms, steady monthly payments, and up to 20-year terms.
- HELOC: Flexible credit lines, interest-only draw periods up to 20 years, and access to funds on demand.
These kinds of features—especially around transparency and minimal fees—make credit unions appealing to military members seeking reliable financial products.
Before borrowing, consider how long you’ll stay in your home, your deployment or PCS schedules, and your personal budgeting style. If you’re unsure, lenders often offer calculators or consultations to help assess which option aligns best with your goals.