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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 | 7.23% | 7.99% | 6.63% |
| 15-year | 7.72% | 8.99% | 6.75% |
Factors affecting 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
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.
Introduction to home equity loans
What is a home equity loan?
A home equity loan is a type of second mortgage that lets you borrow from the equity you have in your home.
How do home equity loans work?
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. Home equity loan rates are typically fixed.
How to get the best home equity loan rates
Improve 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.
Compare different lenders
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.
Types of home equity loans
The term "home equity loan" can sometimes refer to any type of loan that lets you borrow from the equity in your home. This includes home equity lines of credit (HELOCs) and cash-out refinances, in addition to standard home equity loans.
HELOCs vs. home equity loans
HELOCs are another 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.
Second mortgage vs. cash-out refinance
In addition to these second mortgage options, 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.
Pros and cons of each type
| Loan type | Pros | Cons |
| Home equity loan |
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| HELOC |
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| Cash-out refinance |
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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. If you're able to get a home equity loan rate that's near or below current average rates, it's likely you got a good rate.
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.
