See below for home equity loan interest rates available as of November 28, 2023 . Interest rates are generally subject to market conditions and can change at any time without notice. If you find a good deal, we recommend submitting an application and rate lock (where applicable) as soon as possible.
NOTE: The home equity loan rates table displays below and may take a few seconds to load.
Another option: You may also want to consider a no payment home equity “loan”, which enables you to borrow against your home equity with no monthly payments and no interest charges even if your credit isn’t perfect.
Table of Contents
What is A Home Equity Loan?
A home equity loan is a type of mortgage many homeowners use to borrow against home equity. Home equity loans are commonly used to consolidate debt, fund home improvements, or make large purchases.
Home equity loans are usually structured as junior liens behind existing mortgages, which is why you may hear people refer to them as second mortgages. However, you don’t need to have an existing mortgage to get a home equity loan. You can get one even if your home is free and clear.
A home equity loan may be an attractive option if you already have a low interest rate mortgage. You can borrow against your equity without having to refinance your existing mortgage.
How Does a Home Equity Loan Work?
Home equity loan terms can vary, but they usually have fixed rates and set repayment terms. You borrow the full amount up front in one lump sum, then pay it back over a set loan term of 10 or 15 years.
The relatively short payoff term can sometimes be a disadvantage because it results in a higher payment than a longer term loan. However, the shorter loan term also means you’re paying off the loan faster, which saves you interest.
Because home equity loans are usually structured as second mortgages, they’re riskier from a lending standpoint. Average home equity loan rates tend to be higher than average cash out refinance mortgage rates.
Home equity loans are often cheaper and simpler to get than a cash out refinance. Closing costs are typically much cheaper and the application and approval process is simpler and faster.
What’s the Difference Between a Home Equity Loan and a HELOC?
The terms home equity loan and home equity line of credit (HELOC) are often used interchangeably by mortgage professionals and homeowners. Both are a type of mortgage used to borrow against home equity, but they function in different ways.
A home equity line of credit, or HELOC, is a revolving credit line that usually has a variable interest rate (but not always) and an interest-only payment. Instead of borrowing all the money in one lump sum up front, you borrow as needed over time. This flexibility makes HELOCs an attractive way to tap into home equity.
A home equity loan works a little differently. You borrow all the money in one lump sum up front and pay it back over a set loan term. Unlike a HELOC, home equity loan rates are usually fixed.
Home equity loans are commonly referred to as second mortgages. HELOCs can technically be second mortgages as well if they’re placed behind an existing first mortgage. However, when somebody refers to second mortgage rates, they’re likely referring to fixed rate second mortgages, i.e., home equity loans.
Should I Get a Home Equity Loan or a HELOC?
The answer to this question depends on how you plan to use the funds. If you don’t need the proceeds right now, a HELOC may be better. You can borrow what you need when you actually need it.
Of course, don’t forget that HELOCs usually have variable interest rates. If interest rates increase, your payment could increase as well.
If you need the money now, a home equity loan probably makes more sense. For example, if you’re consolidating debt or making a large purchase, you’ll likely need all the money up front, so you may want to go with a home equity loan.
The home equity loan also comes with the added benefit of a fixed interest rate and a set repayment term.
How To Get The Best Rate on a Home Equity Loan
Home equity loan rates are heavily based on credit scores. If you want the best home equity loan rates, you need to have strong credit scores.
Debt-to-income ratio sometimes matters as well, but credit scores are usually the most important qualifying factor.
Credit scores range from a low of 350 to a high of 850. According to Credit.com, the average credit score in the United States was 711 in 2021. There are five main factors that influence your credit scores:
- Payment history: 35%. It’s very important for your credit scores that you make your payments on time.
- Credit utilization: 30%. If you have high utilization (i.e., you’re “maxed out”) on credit cards, expect your scores to suffer even if you make your payments on time. Keep your utilization below 30% of the credit limit.
- Credit age: 15%. Length of credit history is important. Avoid closing old accounts unless absolutely necessary.
- Credit mix: 10%. Lenders like to see a mix of different types of credit accounts, such as revolving (credit card) accounts and installment loans like mortgages, car loans, etc.
- New credit: 10%. Be careful when applying for new credit cards or loans. Too many new accounts can damage your scores.
How Can I Improve My Credit Scores?
Again, home equity loan rates depend heavily on credit scores. It’s important to have high credit scores so you can get the best loan deal.
The best way to improve your credit scores is to make your payments on time. As we’ve covered, payment history is the single largest component of the credit score calculation.
It’s also important to avoid overutilizing your revolving credit. High utilization can damage your credit scores even if you make your payments on time. Keep your credit card balances below 30% of the credit limit at all times.
Length of credit history also contributes to good credit scores, but it’s a smaller component of the credit score calculation. If want to close some accounts, we recommend closing your newer accounts first.
Be careful not to open too many new accounts at one time. If you’re shopping aggressively for new loans, it may hurt your credit scores.
If you’d like to learn more about how to improve your credit scores, check out the video.
Do Credit Inquiries Damage Credit Scores?
It’s important to be careful with credit inquiries, but you don’t need to be paranoid about them. It’s not a problem if you incur a few credit inquiries as you shop for the best deal. If the inquiries are for the same type of loan and they occur in a short time frame, they’re treated as one inquiry by the credit bureaus for scoring purposes.
Credit inquiries usually only damage your scores if you incur a lot of them in a short time frame. You don’t want to look like you’re desperately shopping for a loan by having a lot of lenders run your credit (car dealers are notorious for this). If you do, your credit scores will likely suffer.
Again, credit inquiries are not usually a problem as long as you don’t have an excessive number of them.
How long does it take to get a home equity loan?
The application process for a home equity loan is usually faster and simpler than for a cash out refinance. Expect the application process to take a few weeks to a month, depending on whether the lender needs an appraisal or not.
Are average home equity rates higher than mortgage rates?
Yes, home equity loan rates are usually higher than refinance mortgage rates. Home equity loans are usually structured as a junior lien behind an existing mortgage, so they’re riskier from a lending standpoint. Additionally, home equity loan rates can be higher because the loan amounts are usually smaller than other types of mortgages. If you’d like to check current home equity loan rates today for a variety of lenders, you can find them at the top of this page.
What is the current interest rate on a home equity loan?
Interest rates for home equity loans depend mainly on market conditions, credit scores, and how much home equity you have. There is no set rate that everybody qualifies for. If you’d like to check current rates for today, you can find them at the top of this page.
What is the monthly payment on a $100 000 home equity loan?
It’s hard to say without know the interest rate, which depends mainly on current rate conditions, your credit scores, and how much equity you have in your home. If you’d like to check current rates and get a payment estimate, check out the top of this page.
What is the average interest rate on a home equity loan?
Interest rates for home equity loans depend mainly on market conditions, credit scores, and how much home equity you have. There is no set rate that everybody qualifies for. If you’d like check the latest rates for today, you can find them at the top of this page.
What is the downside of a home equity loan?
Home equity loans usually have higher interest rates, which could be considered downside. They also have shorter loan terms than a cash out refinance, which can make the payment higher. However, the shorter loan term also means the loan is paying off faster, which saves you interest.
What is a home equity loan?
A home equity loan is a type of mortgage that enables you to borrow against your home equity. Home equity loans are most commonly structured as a second mortgage behind an existing mortgage. For current home equity rates, check out the top of this page.
How does a home equity loan work?
A home equity loan is very simple to understand. You borrow all the money up front and repay it at a fixed rate over a set repayment period. If you’d like to shop current home equity loan fixed rates, check out the top of this page.