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 come with variable interest rates that fluctuate depending on several factors, which can make your monthly payments adjust with your interest rate at any given time |
You have consistent access to credit that they can use for emergency expenses or other quick costs | Lenders use your property for collateral when you take out a HELOC, which jeopardizes your house if you default |
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 |
HELOCs can be an excellent option to consolidate your other debt payments into one monthly payment and boost your credit score | If the property value drops, you can owe more on your HELOC 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 loans offer fixed interest rates and monthly payments that stay the same over 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 loan funds are offered via one-time, lump-sum payments that are ideal for handling large expenses | Lenders impose strict credit score and debt-to-income ratio requirements that make it difficult to qualify for a home equity loan |
Unlike other fixed loan types, you can use your home equity loan funds for any purpose | Fees and charges can raise your overall payment amount and prolong your repayment efforts |
If you use the loan to buy, build or improve your home, you can potentially deduct your interest payments from your tax return | 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?
Home equity is important because it signifies how much wealth you have based on how much of your home you own. The more equity you have, the more wealth you’ve accumulated.
If you ever need to utilize your home equity, you can tap into it with a home equity loan or home equity line of credit. You might also want to explore a cash-out refinance as an option to use your home’s equity.
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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