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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 s 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 | 9.15% |
80.00% LTV | 9.32% |
90.00% LTV | 10.12% |
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 | 9.15% |
80.00% LTV | 9.32% |
90.00% LTV | 10.15% |
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 | 9.20% |
80.00% LTV | 9.39% |
90.00% LTV | 10.28% |
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 May 15, 2024
Pros and Cons of a HELOC
| Pros | Cons |
|---|---|
Average interest rates range between 8% and 10%, which is lower than other loan types | Variable interest rates fluctuate based on the federal benchmark rate, potentially increasing monthly payments |
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 | Defaulting on a HELOC can place your house at risk of foreclosure since your property serves as collateral, or insurance, for the lender |
If your HELOC meets IRS guidelines, your interest may be tax-deductible, but you must use the funds to purchase, build or improve a home | You can expect to pay loan fees between 2% to 5% of your total loan expenses fees |
HELOCs can be an excellent option to consolidate your other debt payments into one monthly payment and boost 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 | 9.10% |
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 | 9.25% |
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 | 9.42% |
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 | 8.71% |
80.00% LTV, $250K | 9.06% |
90.00% LTV, $250K | 9.64% |
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 | 9.28% |
80.00% LTV, $500K | 9.90% |
90.00% LTV, $500K | 10.05% |
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 May 15, 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 put your property at risk of foreclosure since your home secures your loan against defaulted payments |
Home equity loans offer lump-sum funds that are ideal for tackling large expenses like home repairs, down payments and more | Lenders impose strict credit score and debt-to-income ratio requirements that make it difficult to qualify for a home equity loan |
Home equity loans are unrestricted, meaning you can use them for almost any expense, including home renovations or auto repairs | Fees and charges can raise your overall payment amount and prolong your repayment efforts |
If you use the loan to buy, build or improve your home, you can potentially deduct your interest payments from your tax return | You could end up with an “underwater” loan, which occurs when you end up owing more than your home is worth |
Why Is Home Equity Important?
Two major ways you build home equity is when the value of your home goes up (appreciation) and the balance of your mortgage goes down. As you make ongoing, regular monthly payments to your mortgage, your home equity will increase and so will your wealth.
Borrowing against your home equity lets you use money for major financial needs, including:
- Home improvements, upgrades or repairs
- Consolidating debt
- Making large payments on high-interest debt
- Educational costs
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 Does a Home Equity Loan Work?
You earn home equity every month when you make your mortgage payments. The more payments you make, the more your equity increases.
A home equity loan is a lump-sum loan based on how much of your home you own outright. So if your loan-to-value ratio (LTV) is 50%, you can borrow, say, 80% of that LTV. Most lenders won’t let you access 100% of your home’s equity, but even getting a portion of it through a home equity loan could be a game-changer for your big financial needs.
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