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Home equity loans and home equity lines of credit (HELOCs) allow homeowners to tap into the value of their homes.
A home equity loan is a fixed-rate, lump-sum loan that allows homeowners to borrow up to 85% of their home’s value and pay that amount back in monthly installments. A home equity line of credit is a variable-rate second mortgage that draws on your home’s value as a revolving line of credit.
Both options use your property as collateral for your payments, which means your lender can seize your property if you can’t repay what you borrow.
Related: Best Home Equity Loan Lenders
$100K HELOC Loan Rates
—Ideal for Medium-Sized Projects
| LOAN TERM | APR |
|---|---|
60.00% LTV | 9.13% |
80.00% LTV | 9.30% |
90.00% LTV | 10.18% |
A $100K HELOC is suitable for more extensive renovation projects or other significant financial needs. Compare the rates and terms to find the best fit for your situation.
$250K HELOC Loan Rates
—Access More Funds for Major Investments
| LOAN TERM | APR |
|---|---|
60.00% LTV | 9.12% |
80.00% LTV | 9.31% |
90.00% LTV | 10.21% |
For larger projects or investments, a $250K HELOC provides the necessary funds with various LTV options. Explore these rates to determine the right balance between borrowing capacity and risk.
$500K HELOC Loan Rates
—Maximize Your Borrowing Power
| LOAN TERM | APR |
|---|---|
60.00% LTV | 9.17% |
80.00% LTV | 9.37% |
90.00% LTV | 10.35% |
If you have substantial equity in your home and need significant financing, a $500K HELOC offers a great deal of borrowing power. Evaluate these options to find the optimal rate and term for your goals.
*Data accurate as of July 31, 2024
Pros and Cons of a HELOC
| PROS | CONS |
|---|---|
Average interest rates range between 8% and 10%, which is lower than other loan types | HELOCs typically offer variable interest rates, which can make monthly payments hard to manage and budget over time |
Like a traditional credit card, HELOCs give you access to a revolving line of credit that you can use as needed to cover unexpected expenses and other needs | When you take out a HELOC, the lender will use your property as collateral, which means you can lose your home if you fall behind on payments |
Interest payments may be tax deductible if you meet IRS guidelines and prove that you will use the funds to buy, improve or build a home | HELOCs can come with significant fees that range from at least 2% to 6% of your total loan costs fees |
Using your HELOC to pay other debt consolidates your other payments, lowers your overall credit utilization and improves your credit score | If your home’s value drops while you have a HELOC, you could end up owing more than your home is worth |
5-Year Home Equity Loan Rates (60 Months)
| LOAN TERM | APR |
|---|---|
60.00% LTV, $50K | 8.11% |
80.00% LTV, $50K | 8.37% |
90.00% LTV, $50K | 9.09% |
A 5-year term offers a shorter repayment period with typically higher monthly payments. These products are suitable for borrowers looking for a quicker payoff.
10-Year Home Equity Loan Rates (120 Months)
| LOAN TERM | APR |
|---|---|
60.00% LTV, $150K | 8.29% |
80.00% LTV, $150K | 8.55% |
90.00% LTV, $150K | 9.22% |
With a 10-year term, borrowers can enjoy a balanced monthly payment while still building equity quickly. 10-year home equity loans are ideal for medium-sized projects or financial needs.
15-Year Home Equity Loan Rates (180 Months)
| LOAN TERM | APR |
|---|---|
60.00% LTV, $200K | 8.47% |
80.00% LTV, $200K | 8.75% |
90.00% LTV, $200K | 9.39% |
A 15-year term provides lower monthly payments compared to shorter terms, offering more affordability while still progressing toward your financial goals.
20-Year Home Equity Loan Rates (240 Months)
| LOAN TERM | APR |
|---|---|
60.00% LTV, $250K | 8.70% |
80.00% LTV, $250K | 9.06% |
90.00% LTV, $250K | 9.60% |
Offering longer repayment and lower monthly payments, 20-year home equity loans are suitable for larger investments and long-term financial planning.
30-Year Home Equity Loan Rates (360 Months)
| LOAN TERM | APR |
|---|---|
60.00% LTV, $500K | 9.25% |
80.00% LTV, $500K | 9.88% |
90.00% LTV, $500K | 10.00% |
The 30-year term maximizes affordability with the lowest monthly payments. These options are best for substantial borrowing needs and long-term investments.
*Data accurate as of July 31, 2024
Pros and Cons of a Home Equity Loan
| PROS | CONS |
|---|---|
When you take out a home equity loan, your interest rate won’t increase, even if federal rates go up | You must use your home as collateral to take out a home equity loan, which means you could lose it with too many missing or late payments |
You’ll receive a lump sum that can be used for big purchases such as a home renovation | Home equity loans have strict requirements that can make them difficult to qualify for |
Unlike other fixed loan types, you can use your home equity loan funds for any purpose | Home equity loans come with several costs and fees that can add up and offset the benefits of a lower interest rate |
The IRS allows home equity borrowers to deduct interest payments from their taxes if they meet specific guidelines | If your home’s value decreases during your loan term, you may end up owing more than your loan is worth |
What Is Home Equity?
Your home equity is the appraised value of your home minus your remaining mortgage balance, usually expressed as a percentage. You’ll continue to build your home equity as long as you make on-time monthly payments and your home doesn’t vastly depreciate over time. Once you’ve paid your loan in full, you own all the equity in your home.
How Does a Home Equity Loan Work?
A home equity loan is a lump-sum loan that allows you to borrow money by leveraging your home’s equity.
The maximum amount you’re allowed to borrow is based on how much equity you have in your home, up to the amount offered by that lender. These types of loans tend to have competitive interest rates since they’re secured loans. Your home is used as collateral to secure the loan, meaning if you miss or fall behind on payments, you could face foreclosure.
How Do I Calculate Home Equity?
You’ll calculate your home equity by taking your home’s current value—based on its most recent appraisal—and subtracting it from your current mortgage balance.
For example, say your home is valued at $500,000 and your mortgage’s outstanding balance is $250,000. This would mean you have $250,000 in home equity, and your loan-to-value ratio (LTV) would be 50%. If you’re looking for a home equity loan or line of credit, lenders usually only approve up to a certain LTV ratio. For example, some lenders require 80% LTV or less.
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