How to get the best home equity loan rates in 2024

By: Peter Warden Reviewed By: Jon Meyer
February 21, 2023 - 6 min read

What are today’s best home equity loan rates?

Since rates can change more than once a day, it’s not very helpful to quote actual rates here. But what might be useful is to tell you that the best home equity loan rates we could find when this was written were slightly lower than the average rate for a 30-year, fixed-rate mortgage.

But don’t get too excited. That’s unusual and home equity loans (HELs) typically have interest rates that are a bit higher than those for those mortgages.

The only way you can be sure what the best home equity loan rates available to you are is to get quotes from several lenders. Read on and we’ll tell you how we can help with that.

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Current HEL rates

Borrowing rates generally rose during 2022 and into early 2023 as the Federal Reserve hiked its federal funds rate. And, as a rule, home equity loan rates followed that trend.

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However, new mortgage rates (including those for second mortgages, such as HELs) are only indirectly affected by Fed rates. They’re greatly influenced by those but not tied to them.

So, mortgage rates peaked in mid-October 2022 when they reached 7.24%, according to Mortgage News Daily’s archive. But then they fell back, reaching 6.04% by Feb. 1, 2023. Those figures are for strong borrowers with big down payments, high credit scores, and small existing debts.

Where will they go next? That will largely depend on how bond markets and the Fed respond to new economic data. Most expect general interest rates to head lower again during 2024 but some hope that will begin during the second half of 2023.

How do HEL rates compare?

We’ve already established that the relationship between mortgage rates and other rates varies depending on market and economic conditions. But that also applies to different types of first and second mortgages.

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So, your new first mortgage (the one you’re using to buy or refinance a home) usually has a lower rate than a second mortgage (a home equity loan or home equity line of credit, aka HELOC). But, as we discovered today, that’s not always the case.

It’s the same for home equity loans and HELOCs. Since rates change daily for both, it’s hard to say with certainty which one will offer a more competitive rate.

So, if you’re thinking of getting a second mortgage and either type could suit you, you should get quotes to compare the best home equity loan rates with the best HELOC ones at the time you’re applying.

How HEL rates work

Almost all home equity loans come with fixed interest rates but many have a starting payment that is for interest only. That brings two main advantages:

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  1. You don’t have to worry about how high interest rates rise. Yours is fixed
  2. You can budget for your payments easily. Each monthly installment is the same: from the first to the last

Of course, it can be frustrating if other interest rates suddenly tumble and yours remains the same. If the fall is big enough, you can refinance your loan. But make sure you include the closing costs in your calculation when deciding whether to do so.

Those fixed rates make home equity loans different from HELOCs, which typically have variable rates. For other differences, read HELOC vs. home equity loan: Compare pros and cons.

How to get the best home equity loan rates

Lenders look at three main factors when deciding the best home equity loan rates they can offer you. They’ll look especially closely at your:

  1. Credit score — That shows how responsibly you’ve managed debt in the past
  2. Loan-to-value (LTV) ratio — The more equity you have, the more a lender will let you borrow. Your LTV ratio shows how much you owe on your mortgage relative to how much your home is worth. It’s best to aim for an LTV of 80% or less.
  3. Your existing debt burden as a proportion of your income — If you’re already struggling to stay on top of your existing debts, your lender will wish to know how you’ll cope with another big one. But it may be sympathetic if you’re borrowing to consolidate those debts

If you have time, it’s a good idea to get your finances in shape before applying for your loan. But focus on those three bullet points.

Often, the fastest way to earn yourself the best home equity loan rates is to pay down credit card balances. Keep each balance below 10% of that card’s credit limit and, if you weren’t doing that already, you should both boost your credit score and lower your existing debt burden.

Who has the best home equity loan rates?

We’d love to be able to name a lender that always offers the best HEL rates to every applicant. But there are two main reasons why there’s no such lender.

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First, lenders tend to specialize in different sorts of borrowers. So, some are most comfortable with so-called top-tier borrowers with stellar credit scores, huge down payments, and few other debts.

Other lenders operate at the opposite end of the spectrum and do their best to help subprime borrowers. And many lenders cater to those in between those two groups. You’ll likely get your best rate from a lender that’s used to working with applicants like you.

And the second reason we can’t name a perfect source for your home equity loan is that each lender’s priorities change constantly. So, the one offering the lowest HEL rate today — perhaps because it’s yet to meet its monthly lending target — may offer a much poorer one next week when its target has been met.

Home equity loan rates FAQ

Are home equity loan rates fixed?

Yes, HEL rates are almost invariably fixed. This removes stress when rates are rising. And it helps you to budget easily.

Are home equity loan rates lower than HELOCs?

On the day this was written, the best HEL rate we could find was a bit lower than the best HELOC rate. But that’s not always the case and may not be so when you compare the two.

What’s a good home equity loan interest rate?

Your best home equity loan rate is the lowest one among the multiple quotes you receive from prospective lenders. And that will be determined by prevailing HEL rates at that time plus how attractive your borrower profile is to lenders. You’ll be more likely to get a better rate with a higher credit score, lighter debt burden, and a greater amount of equity left in your home.

Can my home equity loan rate change?

No. We haven’t spotted a variable-rate HEL for many years. And your fixed rate means consistent, equal monthly payments throughout the life of your loan.

What’s the difference between a home equity loan and a HELOC?

There are several differences. With a HELOC, you receive a line of credit which you can draw down and repay as you wish, up to your credit limit. And you pay interest (at a variable rate) only on your balance. So, it’s a bit like a credit card with a very low rate. But there are significant differences between plastic and HELOCs, so read up on the latter before you choose one.

A HEL gives you a single lump sum at a fixed interest rate. And you repay it in equal installments over the term you choose at the outset.

Is a home equity loan or HELOC better?

That depends entirely on what you want the money for. A HEL’s lump sum makes it ideal for big home improvement projects, debt consolidation, and big-ticket purchases. And its fixed rate makes budgeting easy.

A HELOC’s great if your income varies a lot and you need to iron out the peaks and troughs. You can borrow during lean times and repay during plentiful ones. And it can be good for borrowing large amounts for short periods because you pay interest only on each month’s balance.

How to find your best home equity loan rate

The only way to get the best rate for which you qualify is to shop around multiple lenders, requesting a quote from each. This “loan estimate” is a standardized document so it’s easy to compare them. But first, check out How to read a mortgage Loan Estimate, which will tell you what to look out for in your HEL quote. (HELOC quotes are different.)

Verify your home equity loan eligibility. Start here

In particular, heed the advice of a federal regulator, which says, “home equity loans may have upfront fees and costs, so be sure to compare more than just your monthly payment when shopping around.” Find your best overall deal.

Sometimes, online lenders and credit unions offer lower rates than big, brick-and-mortar banks. But that’s not always the case. So, extend your comparison-shopping exercise across as many different types of lenders as you can. You certainly want a minimum of three quotes and preferably more.

We can help get you started by introducing you to several lenders that will offer you a good deal. Just complete our simple, no-obligation form to receive multiple quotes.

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Peter Warden
Authored By: Peter Warden
The Mortgage Reports Editor
Peter Warden has been writing for a decade about mortgages, personal finance, credit cards, and insurance. His work has appeared across a wide range of media. He lives in a small town with his partner of 25 years.
Jon Meyer
Reviewed By: Jon Meyer
The Mortgage Reports Expert Reviewer
Jon Meyer is a mortgage loan officer (NMLS #1590010) with over five years in the lending industry. He currently works at Supreme Lending in Mill Valley, CA (NMLS #2129) and has served as an expert adviser for The Mortgage Reports’ editorial team.