There are two major types of home equity loans. Open end/open ended home equity loans (also referred to as a home equity line of credit) is what is called a revolving credit loan and works in a manner similar to a credit card. The borrower uses the equity in their home to establish a credit line against which they can borrow. In this type one can choose when to borrow and repay, with low minimum payments – like a credit card.

In a closed end/closed ended home equity loan, the borrower receives a fixed disbursement – typically at the time of the signing of the loan. As with an open ended home equity loan, the maximum amount of the loan depends on the equity. So for example, if the value of the asset is $475,000, and the liabilities – in this case remaining debt secured against the house is $75,000 – then your equity in the home would be $400,000 (assets minus liabilities). Typically you cannot borrow beyond your equity, but some so-called over-equity loans will allow you to borrow more.