Compare current home equity loan rates and understand how they differ from HELOCs.
How Home Equity Loan Rates Work
Home equity loan rates are fixed, meaning your rate and monthly payment stay the same for the life of the loan. The lender is in second-lien position — if you default, the primary mortgage gets paid first — which is why lenders price these loans separately from first mortgages. Your credit score, equity and loan term are the biggest factors in the rate you’ll receive.
This page doesn’t list a rate for each credit tier because lenders set and change their own. For a benchmark, Freddie Mac’s weekly survey put the 30-year fixed first-mortgage average at 7.40% and the 15-year at 6.73% for the week of October 8, 2026. Ask each lender for a written quote for the loan amount and term you want.
Home Equity Loan vs HELOC Rates
The fundamental trade-off is predictability versus flexibility. A home equity loan locks in a fixed rate and delivers a lump sum — ideal when you know exactly how much you need. A HELOC gives you a revolving credit line you can draw from over time, but the variable rate means your costs can shift with the market.
| Feature | Home Equity Loan | HELOC |
|---|---|---|
| Rate | Fixed, set by the lender | Prime (7.00% as of October 13, 2026) + margin |
| Rate Type | Fixed | Variable (usually) |
| How You Receive | Lump sum | Draw as needed |
| Payment | Same monthly payment | Changes with balance/rate |
| Best For | One-time large expense | Ongoing/uncertain needs |
| Rate Risk | None | Rates could rise |
Monthly Payment Calculator
Home equity loan payments are fully amortised, so you pay the same amount every month for the entire term. Shorter terms mean higher monthly payments but substantially less total interest. A $100,000 loan at 7.40% costs about $41,800 in interest over 10 years versus about $91,900 over 20 years — choosing the shortest term you can comfortably afford saves tens of thousands.
Fixed-rate home equity loan payments at 7.40%, the Freddie Mac 30-year average (week of October 8, 2026), used only as an illustration, not a quote:
10-Year Term @ 7.40%
| Loan Amount | Monthly Payment | Total Interest |
|---|---|---|
| $25,000 | $295 | $10,454 |
| $50,000 | $591 | $20,908 |
| $75,000 | $886 | $31,362 |
| $100,000 | $1,182 | $41,817 |
| $150,000 | $1,773 | $62,725 |
15-Year Term @ 7.40%
| Loan Amount | Monthly Payment | Total Interest |
|---|---|---|
| $25,000 | $230 | $16,460 |
| $50,000 | $461 | $32,920 |
| $75,000 | $691 | $49,381 |
| $100,000 | $921 | $65,841 |
| $150,000 | $1,382 | $98,761 |
20-Year Term @ 7.40%
| Loan Amount | Monthly Payment | Total Interest |
|---|---|---|
| $25,000 | $200 | $22,969 |
| $50,000 | $400 | $45,939 |
| $75,000 | $600 | $68,908 |
| $100,000 | $799 | $91,878 |
| $150,000 | $1,199 | $137,816 |
How Much Can You Borrow?
Your borrowing limit is determined by how much equity you have after accounting for your existing mortgage. Most lenders cap your combined loan-to-value at 80%, so you need at least 20% equity before any home equity borrowing is available.
Most lenders allow 80-85% combined LTV:
| Home Value | Mortgage Balance | Max Equity Loan (80% LTV) |
|---|---|---|
| $350,000 | $200,000 | $80,000 |
| $400,000 | $250,000 | $70,000 |
| $500,000 | $300,000 | $100,000 |
| $600,000 | $350,000 | $130,000 |
| $750,000 | $400,000 | $200,000 |
Formula: (Home Value × 80%) - Mortgage Balance = Max Home Equity Loan
Loan Amount and Purpose
Lenders may price larger and smaller loans differently, and loans under a lender’s minimum may not be available at all, so ask each lender how loan size affects its rate and fees. If you only need a small amount, a personal loan might be a simpler alternative.
- Home improvement: interest may be tax-deductible (see below).
- Debt consolidation: compare the new payment and total cost with what you pay now; the home secures the loan.
- Education: consider federal loans first.
- Major purchase or emergency: compare with other financing, and build an emergency fund instead where you can.
Closing Costs
Home equity loans carry closing costs similar to a first mortgage but on a smaller scale. Fees depend on your loan size and lender, so ask for a fee schedule. Some lenders waive closing costs entirely in exchange for a higher interest rate — worth considering if you plan to pay off the loan early.
| Fee | Can Negotiate? |
|---|---|
| Application fee | Often |
| Origination | Often |
| Appraisal | Limited |
| Title search | Usually not |
| Credit report | Usually not |
| Recording | Usually not |
Note: Some lenders offer no-closing-cost options with a higher rate.
Home Equity Loan vs Cash-Out Refinance
$100,000 needed, current mortgage: $300,000 at 5.50%. New-loan rates are illustrations at the 7.40% Freddie Mac 30-year average (week of October 8, 2026), not quotes.
Home Equity Loan
| Feature | Value |
|---|---|
| New loan | $100,000 @ 7.40%, 15 years |
| Keep existing mortgage | $300,000 @ 5.50% |
| Payment 1 (mortgage) | $1,703 |
| Payment 2 (equity) | $921 |
| Total Payment | $2,625 |
Cash-Out Refinance
| Feature | Value |
|---|---|
| New loan | $400,000 @ 7.40%, 30 years |
| Payment | $2,770 |
| Closing costs | Ask the lender; usually higher than a home equity loan |
| Total Payment | $2,770 |
Analysis: The home equity loan route has the lower monthly payment here and preserves your 5.50% first mortgage, but its 15-year term pays the second loan off faster. The refinance replaces your 5.50% rate with 7.40% on the whole balance. The better choice depends on the quotes you get and how long you keep the loan.
Qualification Requirements
Lenders evaluate the same core factors as a mortgage: credit score, equity, income, and debt load. The key difference is that home equity loans require sufficient equity after your first mortgage is accounted for. Meeting the minimums gets you approved, but a stronger credit profile unlocks materially better rates.
| Requirement | Typical Minimum |
|---|---|
| Credit score | 620 (680+ for best rates) |
| Home equity | 15-20% minimum |
| Combined LTV | 80-85% maximum |
| Debt-to-income | Within the lender’s limit (limits differ by lender) |
| Income | Documented, stable |
| Property | Primary residence |
Tax Implications
| Use of Funds | Interest Deductible? |
|---|---|
| Home improvement | Yes (up to $750K total mortgage debt) |
| Debt consolidation | No |
| Education | No |
| Other personal | No |
Example: $100K home equity loan for a new roof at 7.40% over 15 years (illustration):
- First-year interest: ~$7,273
- Tax bracket: 24%, if you itemize
- Tax savings: ~$1,746 in year one
- Effective rate after the deduction: ~5.62%
Getting the Best Rate
| Strategy | Why it helps |
|---|---|
| Higher credit score | Lenders generally price better credit lower |
| Shop 3-5 lenders | Find the best offer |
| Credit union | Worth including in your quotes |
| Relationship discount | Ask if your bank offers one |
| Autopay | Some lenders discount for it |
| Loan size | Ask how size changes the rate |
When to Choose a Home Equity Loan
Best Uses
| Situation | Why Home Equity Loan Works |
|---|---|
| Major renovation | Lump sum needed, fixed payment |
| Debt consolidation | Lower rate than credit cards |
| One-time large expense | Predictable repayment |
| Rate-sensitive borrower | Locked rate, no surprises |
Avoid If
| Situation | Better Alternative |
|---|---|
| Need ongoing access | HELOC instead |
| Variable amount needed | HELOC instead |
| Small amount (<$10K) | Personal loan may be cheaper |
| Planning to sell soon | May not recover costs |
| Tight budget | Risk losing home |
How to Qualify for a Home Equity Loan
Lenders evaluate four factors when approving home equity loans. Meeting strong criteria on all four gets you the best rate; weakness in one area can mean a higher rate or denial.
The Four Qualification Factors
1. Combined Loan-to-Value Ratio (CLTV) Most lenders cap CLTV at 85%, meaning you can only borrow up to 85% of your home’s appraised value, minus what you owe on your first mortgage.
Example:
- Home value: $400,000
- 85% maximum: $340,000
- First mortgage balance: $230,000
- Maximum home equity loan: $110,000
| Max CLTV | Home Value | First Mortgage | Max Equity Loan |
|---|---|---|---|
| 80% | $400,000 | $230,000 | $90,000 |
| 85% | $400,000 | $230,000 | $110,000 |
| 90% | $400,000 | $230,000 | $130,000 |
Some lenders go to 90% CLTV but charge higher rates.
2. Credit Score A 720+ score gets the best rates. Below 680, expect significant rate premiums or denial at traditional lenders. Credit unions are often more flexible with scores in the 650-680 range.
3. Debt-to-Income Ratio (DTI) Lenders compare your total monthly debt payments (including the new equity loan payment) with your gross monthly income, and different loan products and lenders have different DTI limits. A lower DTI generally helps.
4. Home Appraisal Lenders order an appraisal to confirm your home’s value before approving the loan. You may pay a fee for it upfront. If your home appraises lower than expected, the loan amount will be reduced accordingly.
Tax Deductibility of Home Equity Loan Interest
Interest on a home equity loan is tax-deductible only if the loan is used to buy, build, or substantially improve the home securing the loan. Using a home equity loan to consolidate credit card debt or pay for a vacation disqualifies the interest deduction. The combined mortgage debt limit for deducting interest is $750,000 ($375,000 married filing separately) for loans taken out after December 15, 2017.
Home Equity Loan vs. Cash-Out Refinance
When your existing mortgage rate is well below today’s rates, a home equity loan can beat a cash-out refinance. A cash-out refi replaces your entire first mortgage at today’s higher rate — costing you more on the loan balance you already had.
| Scenario | Home Equity Loan | Cash-Out Refinance |
|---|---|---|
| Existing mortgage rate | Keep your existing rate | Replace with today’s rate (30-year average 7.40%, week of October 8, 2026) |
| New borrowing rate | Lender’s rate on the equity amount only | Mortgage rate on the entire balance |
| Best when | Rates have risen since original mortgage | Rates are similar or lower |
| Closing costs | Usually lower | Usually higher |
| Monthly payment impact | Adds a second payment | Replaces one payment |
For homeowners who locked in rates far below today’s, the home equity loan route is often cheaper than a cash-out refi, but compare real quotes for both.
Related: HELOC Rates | Home Equity Calculator
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