What is home equity?
Equity is your home's current value minus what you still owe on it. If your San Diego home is worth $1.1M and your mortgage balance is $480K, you have $620K of equity. Most lenders will let you borrow against up to 80–85% of your home's value (combined with your existing first mortgage), giving you several hundred thousand dollars of borrowing capacity.
Four ways to tap it
HELOC
A revolving line of credit. Variable rate. Draw what you need over 10 years, repay over 20. Best for ongoing renovation or as a flexible safety net.
HELOC vs. HEL →Home Equity Loan
A fixed-rate, fixed-term second mortgage. Lump sum at close. Best when you know the exact amount and want payment certainty.
HELOC vs. HEL →Cash-Out Refinance
Replace your first mortgage with a larger one. Best when current rates are at or below your existing rate — otherwise the math rarely works.
Cash-out guide →Home Improvement Loan
Renovation-specific financing — RenoFi, FHA 203(k), Fannie HomeStyle. Lend against the home's after-renovation value.
Renovation loans →The "don't touch the first mortgage" problem
If you locked a 3% mortgage in 2020 or 2021, a cash-out refinance at 2026 rates resets your entire balance to the new rate — usually a terrible trade. That's why HELOCs and home equity loans (second-position liens) are dominant right now: you keep your low first mortgage and only pay current-market rates on the equity portion you actually borrow.
The median San Diego homeowner with a sub-4% rate has $400K+ of unused equity. A HELOC can unlock that capital without giving up the rate that's now worth tens of thousands per year.
What you can use equity for
- Renovations. Kitchens, ADUs, primary suite additions. Can also be tax-deductible.
- Debt consolidation. Replacing 22% credit-card debt with 8.5% HELOC interest can save thousands per year — but only if you don't run the cards back up.
- Down payment on a second home or investment property.
- Bridge for a new home purchase. Buy first, sell second.
- Tuition, weddings, large purchases. Cheaper than personal loans; risk is your house.
What you usually shouldn't use it for
- Vacations, cars, or anything that depreciates faster than you can pay it down.
- Stock market speculation or crypto. Borrowing against your house to invest is leverage on leverage.
- Covering ongoing monthly bills. If income won't cover the bills, a HELOC just delays the reckoning.
Equity at a glance — San Diego, 2026
| Option | Rate type | Typical rate (2026) | Best for |
|---|---|---|---|
| HELOC | Variable (Prime + margin) | ~8.0–9.5% | Flexible, ongoing access |
| Home Equity Loan | Fixed | ~8.5–9.75% | One-time projects with known cost |
| Cash-Out Refi | Fixed | ~6.875–7.5% | Only if your existing rate is higher |
| FHA 203(k) / HomeStyle | Fixed | ~6.5–7.25% | Renovation rolled into the purchase or refi |
Rates are illustrative for 2026 and vary by FICO, CLTV, and lender. Get a real quote before deciding.