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 | 8.41% |
80.00% LTV | 8.60% |
90.00% LTV | 9.53% |
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 | 8.40% |
80.00% LTV | 8.60% |
90.00% LTV | 9.57% |
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 | 8.44% |
80.00% LTV | 8.65% |
90.00% LTV | 9.68% |
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 December 17, 2024
Pros and Cons of a HELOC
| PROS | CONS |
|---|---|
You can expect an average interest rate that’s lower than other loan types | You can expect variable interest rates that change over time, which may make it difficult to manage your payments |
If unexpected expenses pop up, HELOCs offer a credit line that you can tap into at any time | 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 |
The IRS allows HELOC borrowers to deduct interest payments from their taxes based on specific guidelines such as using your funds to buy, build or improve a home | You may be on the hook for several fees and expenses, including appraisal fees, application fees and closing costs fees |
HELOCs can be an excellent option to consolidate your other debt payments into one monthly payment and boost your credit score | If the property value drops, you can owe more on your HELOC than your home is worth |
5-Year Home Equity Loan Rates (60 Months)
| LOAN TERM | APR |
|---|---|
60.00% LTV, $50K | 7.86% |
80.00% LTV, $50K | 8.13% |
90.00% LTV, $50K | 8.82% |
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 | 8.05% |
80.00% LTV, $150K | 8.32% |
90.00% LTV, $150K | 8.98% |
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 | 8.22% |
80.00% LTV, $200K | 8.50% |
90.00% LTV, $200K | 9.14% |
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 | 8.48% |
80.00% LTV, $250K | 8.84% |
90.00% LTV, $250K | 9.36% |
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 | 8.86% |
80.00% LTV, $500K | 9.47% |
90.00% LTV, $500K | 9.52% |
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 December 17, 2024
Pros and Cons of a Home Equity Loan
| PROS | CONS |
|---|---|
Your interest rate will remain static over the life of your loan, giving you a consistent monthly payment amount | Home equity lenders use your property as collateral for your loan, which means they can take it if you default |
You’ll receive a lump sum that can be used for big purchases such as a home renovation | Lenders impose strict credit score and debt-to-income ratio requirements that make it difficult to qualify for a home equity loan |
You can use home equity loan funds for almost any reason you see fit | Fees and charges can raise your overall payment amount and prolong your repayment efforts |
Your interest payments may be tax deductible if they meet IRS guidelines | You can have negative equity in your home if your property loses value and you end up with loan debt that exceeds its value |
What Is Home Equity?
Home equity represents how much you own of your home compared to what the bank or mortgage lender owns. If you’ve paid off your home in full, you have 100% equity.
You can utilize your home’s equity without paying off your home in full, whether through a home equity loan or a home equity line of credit (HELOC). You can use your home’s equity for home improvements, repairs, debt consolidation and educational costs, among other things.
What Is a HELOC?
A home equity line of credit, often referred to as a HELOC, lets homeowners convert the equity in a residential property into cash through a revolving line of credit that’s secured by your home.
When you get a HELOC, you can take the money available in installments as you need it and pay interest only on what you use.
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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