Home equity loans and home equity lines of credit (HELOCs) allow homeowners to leverage 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 the value of their home and repay that amount in monthly installments. A home equity line of credit is an adjustable-rate second mortgage that uses the value of your home as a revolving line of credit.

With both options, your property serves as collateral for your payments, meaning your lender can seize your property if you can’t repay the amount you borrow.

Related: Best home loan lenders

Interest rates for $100,000 HELOC loans

—Ideal for medium-sized projects

A $100,000 HELOC is appropriate for more extensive home improvement projects or other significant financial needs. Compare rates and terms to find the best fit for your situation.

Interest rates for $250,000 HELOC loans

—Access to more resources for larger investments

For larger projects or investments, a $250,000 HELOC provides the necessary funds with various LTV options. Research these rates to determine the right balance between borrowing capacity and risk.

Interest rates for $500,000 HELOC loans

—Maximize your credit score

If you have significant equity in your home and need significant financing, a $500,000 HELOC will give you strong credit. Evaluate these options to find the optimal interest rate and term for your goals.

*Data as of August 21, 2024

Advantages and disadvantages of a HELOC

Interest rates for 5-year home loans (60 months)

A 5-year term offers a shorter repayment period with typically higher monthly payments. These products are suitable for borrowers who want faster repayment.

Interest rates for 10-year home loans (120 months)

With a 10-year term, borrowers can enjoy a balanced monthly payment while still building up equity quickly. 10-year home equity loans are ideal for medium-sized projects or financial needs.

Interest rates for home loans with a term of 15 years (180 months)

With a 15-year term, monthly payments are lower than shorter terms, making it easier for you to reach your financial goals while also making it more affordable.

Interest rates for home loans with a term of 20 years (240 months)

Due to the longer repayment period and lower monthly payments, 20-year home equity loans are suitable for larger investments and long-term financial planning.

Interest rates for home loans with a term of 30 years (360 months)

The 30-year term maximizes affordability with the lowest monthly payments. These options are best suited for significant borrowing needs and long-term investments.

*Data correct as of August 21, 2024

Advantages and disadvantages of a home loan

Why is home equity important?

You can build your home equity in two ways: when the value of your home increases (appreciation) and when the remaining balance on your mortgage decreases. If you pay off your mortgage regularly and on a monthly basis, your home equity will increase and so will your wealth.

By taking out a loan against your home, you can use the money for important financial needs, including:

• DIY work, modernizations or repairs
• Debt consolidation
• Making high payments on high-interest debt
• Training costs

HELOC rates are more tied to banks than first mortgage rates, which tend to follow the performance of the bond market. The Federal Reserve, which controls the rates banks charge each other, has signaled to investors that it plans to raise those rates several times in 2022 and beyond.

How does a home loan work?

Your equity in your home is determined by the amount of your mortgage payments. The longer you have paid off your mortgage, the more equity you have. You can leverage this equity through a home equity loan.

A home equity loan is paid out in a lump sum that you can use for home improvements, repairs, debt consolidation or other major expenses. The amount you’re approved for depends on how much equity you bring into your home, your credit score and history, and how much you need.

Different mortgage lenders offer different repayment terms, but longer repayment terms typically mean lower monthly payments. This may be helpful for you if you are paying off your original mortgage and a remortgage loan at the same time.