Key Takeaways
- Your credit score has the biggest impact on your rate, with stronger scores qualifying for significantly lower interest costs.
- Even a 1% rate difference can cost thousands over time, making it essential to compare lenders and improve your financial profile before applying.
- Home equity loans offer predictable, fixed payments, but alternatives like HELOCs, cash-out refinances, HEIs, and reverse mortgages may better suit certain borrowers.
Home equity loan rates are hovering around 7.89% to 8.07% right now, though borrowers with strong credit can find rates closer to 6.50%. That’s a meaningful spread, and where you land depends largely on factors within your control.
This guide breaks down current rate averages by loan term and credit score, explains what drives your personalized rate, and walks through practical steps to secure the best deal when borrowing against your home’s equity.
In this article (Skip to...)
- Current home equity loan rates
- Home equity loan rate trends
- How home equity loan rates affect monthly payments
- Factors that determine home equity loan rates
- ow to get the best home equity loan rates
- Average home equity loan rates by credit score
- Alternatives to home equity loans
- FAQ
What are the current home equity loan rates?
Right now, home equity loan rates average between 7.89% and 8.07% for most borrowers, depending on the loan term. Rates have been trending downward recently, and borrowers with strong credit profiles may qualify for rates closer to 6.50% to 7.50%.
A home equity loan rate is simply the fixed interest rate you pay when borrowing a lump sum against your home’s equity. Unlike a HELOC rate, which has a variable rate that can change, your home equity loan rate locks in at closing and stays the same for the entire repayment period.
| Loan Term | Typical Rate Range |
| 5-year | 7.89% - 8.25% |
| 10-year | 8.00% - 8.50% |
| 15-year | 8.06% - 8.75% |
| 20-year | 8.25% - 9.00% |
These are national averages. Your actual rate depends on your credit, how much equity you have, and which lender you choose. Some borrowers pay more, some pay less.
Home equity loan rate trends
Home equity rates have been gradually falling after hitting multi-year highs in late 2023 and early 2024. The decline reflects broader economic shifts and Federal Reserve policy decisions.
Check your home equity loan options. Start hereA few factors drive where rates go:
- Federal Reserve policy: When the Fed adjusts its benchmark rate, home equity rates typically follow, though not always immediately.
- Inflation: Higher inflation tends to push rates up. As inflation cools, rates often ease.
- Economic outlook: Lenders adjust pricing based on their expectations for the economy and borrower default risk.
Rates remain higher than the historic lows of 2020 and 2021. Whether they continue falling depends on economic conditions that are hard to predict.
How home equity loan rates affect monthly payments
Small rate differences add up over time. Here’s what different rates mean for a $100,000 loan with a 15-year term:
| Interest Rate | Monthly Payment | Total Interest Paid |
|---|---|---|
| 7.00% | $898 | $61,640 |
| 8.00% | $956 | $72,080 |
| 9.00% | $1,014 | $82,520 |
A one-percentage-point difference raises the payment by about $58 per month, and adds more than $10,000 in total interest over the life of the loan.
That means a borrower at 9% would pay roughly $20,000 more in interest than someone who qualifies for 7%. On larger loan amounts, rate shopping and credit improvements can translate into significant long-term savings.
What factors determine your home equity loan rate?
Lenders look at several things when setting your rate. Knowing what they’re evaluating can help you position yourself for a better home equity loan offer.
Check your home equity loan options. Start here- Credit score: The most important factor. Scores above 760 typically qualify for the lowest rates, while scores below 680 often mean higher costs.
- Loan-to-value ratio (LTV): This compares your total mortgage balance (including the new loan) to your home’s value. Most lenders cap combined LTV at 80%–85%. Lower LTV usually means a better rate.
- Debt-to-income ratio (DTI): Lenders prefer DTI below 43%. A lower DTI signals you can comfortably handle another payment.
- Loan amount and term: Larger loans and longer repayment terms may carry slightly higher rates. Shorter terms often come with lower rates but higher monthly payments.
- Lender type: Banks, credit unions, and online lenders price loans differently. Comparing all three can help you find the most competitive offer.
How to get the best home equity loan rates
A few smart steps before and during the home equity loan application process can help you secure a lower rate:
Check your home equity loan options. Start here- Improve your credit score: Check your credit reports for errors and dispute any inaccuracies. Paying down credit card balances can quickly raise your credit score. Even a 20–40 point increase may qualify you for better pricing.
- Lower your loan-to-value ratio (LTV): Estimate your home’s current value and calculate your available equity. The more equity you have, the lower your LTV, and the better your rate prospects.
- Shop multiple lenders: Get quotes from at least three to five lenders. Rates can vary by 0.50% or more for the same borrower. Rate shopping within a 14–45 day window typically counts as a single credit inquiry.
- Consider discount points: Paying upfront discount points (usually 1% of the loan amount per point) can reduce your rate by about 0.25% per point. This works best if you plan to keep the loan long enough to recoup the cost.
- Ask about discounts: Many lenders offer 0.25%–0.50% rate reductions for enrolling in autopay or maintaining other accounts. These savings are often available simply by asking.
Average home equity loan rates by credit score
Your credit score matters more than almost anything else when it comes to your home equity loan rate. Lenders see higher scores as lower risk, and they reward that with better pricing.
| Credit Score | Typical Rate Range |
| 760+ (Excellent) | 6.50% - 7.50% |
| 700-759 (Good) | 7.50% - 8.50% |
| 640-699 (Fair) | 8.50% - 10.00% |
| Below 640 | 10.00%+ or may not qualify |
The difference between “good” and “excellent” credit can mean a full percentage point or more. On a $50,000 loan over 15 years, that adds up to thousands of dollars in extra interest.
Most home equity loan lenders look for a minimum score of 620 to 680. If you’re below that range, spending a few months improving your credit before applying could save you real money.
Alternatives to home equity loans
A home equity loan isn’t your only option. Depending on your goals, timeline, and financial situation, one of these alternatives may be a better fit.
Check your home equity loan options. Start hereHome equity line of credit (HELOC)
A HELOC works like a credit card secured by your home. You draw funds as needed during the draw period and only pay interest on what you borrow. Rates are variable, so payments can change over time.
Cash-out refinance
A cash-out refinance replaces your existing mortgage with a new, larger loan. You receive the difference in cash. This option may make sense if current mortgage rates are lower than your existing rate — but if your current mortgage has a low rate, refinancing could increase your overall borrowing cost.
Home equity investment (HEI)
A home equity investment lets you access your home’s equity without taking on monthly payments or additional debt. Instead of charging interest, the investment company receives a share of your home’s future value when you sell or refinance. This can be appealing if you don’t qualify for traditional financing, but you’ll give up a portion of your home’s appreciation.
Reverse mortgage
Available to homeowners age 62 and older, a reverse mortgage allows you to convert part of your home equity into cash without required monthly payments. The loan is repaid when you sell the home, move out permanently, or pass away. This option can provide retirement income flexibility, but it reduces the equity left to you or your heirs.
Personal loan
Personal loans are unsecured, so your home isn’t used as collateral. Rates are typically higher because there’s no asset backing the loan, but approval and funding are often faster.
Next steps to getting a home equity loan
Getting started is straightforward. Gather recent pay stubs, tax returns, and information about your current mortgage balance. Check your credit score so you know where you stand.
Then reach out to multiple lenders to compare rates and terms. Many lenders can provide rate estimates without a hard credit inquiry, making it easy to shop around.
FAQs about home equity loan rates
Time to make a move? Let us find the right mortgage for youMost lenders reserve their lowest rates for borrowers with credit scores of 760 or higher. You can still qualify with scores as low as 620 to 680, though you'll likely pay a higher rate. Improving your score before applying can help you access better terms.
Some lenders offer rate locks between application and closing, which protects you if rates rise during underwriting. Policies vary by lender, so ask about lock options, duration, and any fees when you apply.
Interest may be deductible if you use the funds for home improvements that substantially improve your property. Interest used for other purposes, like debt consolidation, generally isn't deductible. Consult a tax professional for guidance on your situation.
The typical timeline is two to four weeks from application to closing. The process includes submitting your application, providing documentation, completing an appraisal, underwriting review, and signing closing documents.
Home equity loans and HELOCs typically offer the lowest rates because they're secured by your property. HELOCs sometimes have lower initial rates, while home equity loans provide rate certainty. Comparing offers from multiple lenders helps you find the lowest cost option.
