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 |
|---|---|
Lower interest rates compared to other loan types | HELOCs typically offer variable interest rates, which can make monthly payments hard to manage and budget over time |
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 |
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 may be required to pay several fees, including appraisal, application and closing 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)
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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 | 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 |
Home equity loan funds are offered via one-time, lump-sum payments that are ideal for handling large expenses | Home equity borrowers must typically have a higher-than-average credit score and an excellent debt-to-income ratio to qualify for most loan rates |
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 | 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?
HELOC rates are tied more closely to banks than are first-mortgage rates, which tend to track the performance of the bond market. The Federal Reserve, which controls the interest rates that banks charge each other, has signaled to investors that it expects to raise those rates several times in 2022 and beyond.
How Does a Home Equity Loan Work?
Your equity in your home comes from how much you’ve paid on your mortgage. The longer you’ve been paying off your mortgage, the more equity you have. You can tap into that equity through a home equity loan.
A home equity loan is paid out in a lump sum that you can use for home improvements, home repairs, debt consolidation or another major expense. The amount you’re approved for is based on how much equity you have in your home, your credit score and history, and how much you need.
Different home equity lenders offer different repayment terms, but longer repayment terms usually mean lower monthly payments. This might be helpful for you if you’re paying both your original mortgage and a home equity loan at the same time.
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