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Current home equity loan rates are a little bit lower than current HELOC rates.
If you're looking to fund a home improvement project or repair, a home equity loan can be an affordable way to do so. Compared with other options, interest rates on home equity loans are usually better than personal loan rates and credit card rates.
Current home equity loan rates
We track home equity loan rates from 11 different lenders to help you understand the range of rates that are available to borrowers right now.
| Home equity loan term | Average rate | Highest rate | Lowest rate |
| 10-year | 7.24% | 8.19% | 6.38% |
| 15-year | 7.65% | 8.49% | 6.50% |
How are home equity loan rates determined?
Factors influencing home equity loan rates
As with mortgages and other consumer interest rates, home equity loan rates are affected by both the borrower's financial profile as well as larger, macroeconomic forces.
When you get a home equity loan rate quote from a mortgage lender, it will be determined by factors including:
- Your credit score
- Your debt-to-income ratio
- The amount of equity you have in your home, and how much of it you want to borrow
- The loan's term length
- Which state you live in
- Current economic conditions
Fixed vs. variable home equity loan rates
Home equity loans typically have fixed rates, meaning your rate will stay the same until you pay off the loan. Home equity lines of credit, or HELOCs, usually come with variable rates where the rate changes periodically.
Comparing current rates
Because home equity loans are a type of secured debt, they often have lower rates than many other types of debt, like credit cards.
But rates can vary a lot from one home equity loan lender to the next. It's important to shop around and get multiple rate quotes to compare.
What is a home equity loan?
Definition and overview
A home equity loan is a type of second mortgage that lets you borrow from the equity you have in your home.
How a home equity loan works
Home equity loans work by leveraging the wealth you've built in your home. If you have a mortgage, you don't own your home outright. Instead, a portion of the home's value is tied up with the loan. The part that isn't is called equity.
To determine how much equity you have in your home, take your home's value and subtract your current mortgage balance from that. So, if your home is worth $500,000 and you still owe $300,000 on your mortgage, you have $200,000 in equity.
You'll only be able to borrow a portion of your equity. Typically, lenders won't allow combined loan-to-value ratios above 80% or 90%.
You'll receive the funds for your home equity loan in a lump sum, and then you'll pay it back in equal installments over the life of the loan.
How to get the best home equity loan rates
Improving your credit score
Your credit score is a major factor in determining the rate you'll get on any loan, including a home equity loan. You can build a good credit score over time by making on-time payments toward debts you owe and keeping your credit utilization low.
One relatively quick way to improve your credit score is to pay down credit card debt, since that will lower the amount of available credit you're using. You can also contact your credit card issuer and see if you're eligible for a credit line increase, as this would also lower your utilization rate.
Shopping around for the best rates
If you're looking to get a home equity loan, you can potentially save a lot of money by shopping around with three or four different lenders to compare rates. But be sure to consider the overall picture as well. A lender that has low rates but high closing costs might ultimately not be the best fit.
Consider the loan term
The shorter the loan term, the lower your rate will be. However, many borrowers like longer terms because it gives them more time to pay back the loan, resulting in lower monthly payments.
Pros and cons of home equity loans
Advantages of home equity loans
One benefit of home equity loans is that they're predictable. You can borrow money at a fixed interest rate with a monthly payment that will stay the same throughout the life of the loan.
Because they're tied to your home, home equity loans have lower rates than unsecured types of debt, like a personal loan or credit card. You may also be able to borrow more, depending on how much equity you have.
Plus, if you plan to use the home equity loan to finance a home improvement project or repair, you can deduct the loan's interest on your taxes.
Potential drawbacks of home equity loans
Taking out additional debt on your home can be risky, since your home equity loan lender can foreclose if you stop making payments.
Compared to unsecured loan alternatives, a home equity loan comes with additional costs and requirements that can make it a less convenient option if you're in need of funds. You'll need to have enough equity in the home to qualify, and you'll be required to pay closing costs.
Additionally, depending on how current mortgage rates are trending, it could be cheaper to get a cash-out refinance to tap into your home's equity. But this only makes sense if you can get a lower rate on the new mortgage than what you're currently paying.
Comparing home equity loan rates to other loan options
Home equity loan vs. HELOC
Like home equity loans, HELOCs are a type of second mortgage. A home equity loan differs from a HELOC in that HELOCs operate more like a credit card.
With a HELOC, you'll borrow against a line of credit and accrue interest at a variable rate during the draw period. During that time, you can borrow as little or as much as you need, up to the total loan amount. You'll only pay interest on what you borrow.
When you're in the HELOC draw period, you'll need to make payments toward the interest you accrue. Once the draw period is over, you'll no longer be able to borrow from the HELOC, and you'll begin making principal and interest payments to pay back what you owe.
HELOCs give you more flexibility to borrow exactly what you need and only pay interest on what you've borrowed. But because they come with variable rates, the amount you pay each month could change over time.
Home equity loan vs. mortgage refinancing
You can also use your regular mortgage to tap into your home's equity. To do this, you'll get a type of mortgage refinance called a cash-out refinance.
With a cash-out refinance, you'll replace your current mortgage with a new, larger one. The new loan pays off your existing mortgage, and you receive the remaining amount of the loan in cash. You'll need to keep some of your equity in the home — generally at least 20% of the home's value.
Cash-out refinancing, like other types of mortgages, can come with hefty closing costs. These costs may range from 3% to 6% of the loan amount.
First mortgages like cash-out refinances have lower rates compared to other types of loans. But remember that you'll be paying interest on the full amount you owe on your home, not just the portion of equity you want to borrow. Unless you can get a rate that's lower than your current mortgage rate, you're probably better off with another type of financing.
Home equity loan vs. personal loan
A personal loan is a type of unsecured installment loan. Though these loans typically have higher interest rates compared to home equity loans, you don't have to sacrifice your home equity to get the loan funds. The application process for personal loans is often faster as well, meaning you can get your cash more quickly.
But because personal loans have shorter term lengths, you'll have a higher monthly payment.
Applying for a home equity loan
Required documentation
The documentation you'll need for a home equity loan is similar to what you'll need for a regular mortgage application. This includes documents showing how much you earn, like pay stubs and W2s. The lender will also do a hard check of your credit.
You'll likely also be asked for documentation for your home and current mortgage, like recent mortgage statements or property tax information.
The application process
Before you apply for a home equity loan, you'll want to determine how much equity you have in your home. Sites like Realtor.com, Zillow, and Redfin have tools that can help you get an estimate of what your house is currently worth.
Once you submit an application with a lender, the lender will order an appraisal. Home appraisals determine how much your home is actually worth according to current market conditions and recent similar home sales in your area.
Then, the lender will look over your application and the appraisal and determine how much it's willing to lend you. Once you've got final approval, you'll close on the loan and receive your money.
Current home equity loan rates FAQs
Average home equity loan rates fluctuate based on current market conditions, though the rate you'll get will also depend on your financial profile. Get rate quotes from multiple lenders to make sure you're getting a good home equity loan rate.
Current home equity loan rates fluctuate daily and vary by lender and the details of the loan (for example, shorter loan terms have lower rates than longer terms). Many lenders post sample rates online, so you can see their current rates to get an idea of what you might pay with a given lender.
Home equity loan lenders use your credit score to determine how risky you are as a borrower. They take on more risk lending to those with lower scores, so they compensate by charging them more in the form of a higher rate.
If you use the proceeds from your home equity loan to "buy, build, or substantially improve" your primary residence or second home, you can deduct the interest you pay on your taxes, according to the IRS.
The main risk of a home equity loan is that the debt is secured by your home. This means that if you were suddenly unable to make payments on the loan, you risk losing your home.
The timeline for getting a home equity loan varies, and can take from a few weeks to a couple of months to complete.
Home equity loans are generally fixed-rate loans, but you may be able to find a lender that has variable rate options.
