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 | HELOCs typically offer variable interest rates, which can make monthly payments hard to manage and budget over time |
You only owe interest on your balance and not the full credit line amount | 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 |
HELOCs can be an excellent option to consolidate your other debt payments into one monthly payment and boost your credit score | Borrowing against your home’s equity can be risky because you may owe more on your HELOC than your property is worth if your property value drops |
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 | CONS |
|---|---|
You’ll pay a fixed interest rate that remains consistent during your loan term | Home equity lenders use your property as collateral for your loan, which means they can take it if you default |
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 | Home equity loans come with several costs and fees that can add up and offset the benefits of a lower interest rate |
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 | If your home’s value decreases over time, you could end up with a loan balance that’s higher than your property’s value |
What Is Home Equity?
When you buy your home with a mortgage, your lender pays for that home in full and you make monthly payments back to your lender until it’s repaid. Every month, you earn more equity in your home as you repay your mortgage.
Home equity is the amount of your home that you own, usually expressed as a percentage. You can calculate your home equity by taking the appraised value of your home and subtracting your mortgage balance or other home loans.
Why Is Home Equity Important?
The more home equity you have, the higher your net worth rises. Building wealth is vital to having long-term financial health, and home equity is one way to build wealth.
Every time you make a mortgage payment, you increase your home equity, or how much you own of your home. The more equity you have, the more wealth you amass.
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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