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.
$100K HELOC Loan Rates
Ideal for Medium-Sized Projects
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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
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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
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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.
Pros and Cons of a HELOC
| PROS | CONS |
|---|---|
Average interest rates range between 8% and 10%, which is lower than other loan types | You can expect variable interest rates that change over time, which may make it difficult to manage your payments |
HELOCs let you access your funds as needed compared to a traditional loan that’s paid as a lump sum | Your home serves as collateral, putting your home at risk of foreclosure if you default |
You may receive a tax deduction from your interest payments if you meet specific IRS guidelines and use the funds to cover home-related expenses | 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 the property value drops, you can owe more on your HELOC than your home is worth |
5-Year Home Equity Loan Rates (60 Months)
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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)
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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)
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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)
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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)
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The 30-year term maximizes affordability with the lowest monthly payments. These options are best for substantial borrowing needs and long-term investments.
Pros and Cons of a Home Equity Loan
| PROS | CONS |
|---|---|
Home equity loan interest rates are fixed, meaning your monthly payments will stay the same over the life of your loan | Home equity lenders use your home as collateral for the loan, which could result in foreclosure should you default on your monthly payments |
Home equity loan funds are offered via one-time, lump-sum payments that are ideal for handling large expenses | Lenders impose strict credit score and debt-to-income ratio requirements that make it difficult to qualify for a home equity loan |
There are no limits on what you can use your home equity loan fund for | Fees and charges can raise your overall payment amount and prolong your repayment efforts |
If your home equity loan meets IRS guidelines such as buying, building or improving a home, you can deduct your interest payments from your taxes | Your home’s overall value can drop during your loan term, which could cause you to owe more than it’s 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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