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 correct as of August 27, 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 27, 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 balance on your mortgage decreases. When you make regular, monthly payments on your mortgage, your home equity increases and so does 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

What is a HELOC?

A Home Equity Line of Credit (often referred to as a HELOC) allows homeowners to convert the equity in a residential property into cash through a revolving line of credit secured by their home.

When you get a HELOC, you can withdraw the available funds in installments as needed and only pay interest on what you use.

How do I calculate the equity of my home?

You calculate your equity by subtracting the current value of your home (based on the most recent appraisal) from your current mortgage balance.

For example, let’s say your home is valued at $500,000 and the remaining balance on your mortgage is $250,000. This would mean you have $250,000 in home equity and your loan-to-value (LTV) is 50%. When you’re looking for a home equity loan or line of credit, lenders typically only approve up to a certain LTV ratio. For example, some lenders require an LTV of 80% or less.