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 |
|---|---|
You can expect an average interest rate that’s lower than other loan types | Variable interest rates fluctuate based on the federal benchmark rate, potentially increasing monthly payments |
You only owe interest on your balance and not the full credit line amount | Your home serves as collateral, putting your home at risk of foreclosure if you default |
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 can expect to pay loan fees between 2% to 5% of your total loan expenses fees |
Borrowers looking to consolidate their debt payments can use a HELOC to pay off debts and improve their 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 |
|---|---|
Your interest rate will remain static over the life of your loan, giving you a consistent monthly payment amount | You put your property at risk of foreclosure since your home secures your loan against defaulted payments |
You’ll receive a lump sum that can be used for big purchases such as a home renovation | Strict qualification requirements such as high credit score minimums and low debt-to-income ratios can make it difficult to secure a home equity loan |
You can use home equity loan funds for several purposes, unlike other loan types such as business or auto loans | Home equity loan lenders tend to charge expensive fees that include origination fees, appraisal fees and closing costs |
Interest paid on your home equity loan might be tax-deductible if you itemize your deductions | You could end up with an “underwater” loan, which occurs when you end up owing more than your home is 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.
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
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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