I called Penfed to ask details, and you can only borrow up to the amount of your equity. So, if I assume zillow is correct and our home is worth $122k, and we only owe $71k, we can only borrow the equity: $51k, not quite enough to pay off the original mortgage. So, at least for a bit (however long it took to pay off the remaining $20k mortgage), we'd have two loans.