Home Equity Loan (HEL)

Definition

Home Equity Loan (HEL) in plain English

A home equity loan lets a homeowner borrow against the value they already own in their house, using the house itself as the guarantee — if they don't repay, the lender can eventually claim the home. 'Subordinate to a first mortgage' means that if the house has to be sold, the original mortgage lender gets paid back first, and the home-equity lender only gets whatever is left over — which makes it riskier. 'Non-purchase-money' just means the loan isn't being used to buy the house; the owner already has it and is tapping its value for other things, like renovations or paying off other debt. Because it stands behind the first mortgage in line, an HEL usually charges a higher interest rate to make up for that extra risk.

Learn these first

• Collection period

Related Asset-Backed Securities terms

• Available funds cap
• Cash flow waterfall priority
• Cash trapping
• Charge-off
• Collection period
• Cumulative net loss (CNL)
• Delinquency
• Early amortization
• Excess interest collections
• Excess spread