Home Equity Loan Rates Explained
Home equity rates run higher than first-mortgage rates but far below credit card rates. What you actually get quoted depends on your equity stake, credit, and how you borrow. Here is the full picture.
Home equity loan rates depend on credit score, combined loan-to-value, loan amount, and term. Lump-sum loans usually offer fixed rates; HELOCs usually offer variable rates tied to prime. Compare APRs on identical terms, watch for teaser rates, and check the margin on any variable offer.
What drives your rate
Credit score is the biggest lever: borrowers above 740 get the best pricing, and each tier down adds cost. Combined loan-to-value matters next; borrowing at 80 percent CLTV prices better than 90 percent. Larger loan amounts often price slightly better per dollar because fixed lender costs spread thinner.
Term length moves the rate too: shorter terms usually carry lower rates. And the product itself sets the baseline: fixed lump-sum loans price above first mortgages because they sit in second lien position, which is riskier for the lender.
Fixed vs variable: reading the offer
Lump-sum home equity loans are usually fixed for life: the rate on your closing disclosure is the rate for 15 years. HELOCs are usually variable, quoted as prime plus or minus a margin, and the margin is the permanent part of your price.
Watch teaser rates: some HELOCs offer a low fixed rate for 6 to 12 months, then convert to prime plus margin. Ask for the fully indexed rate (today's prime plus your margin) and the lifetime cap. A 6.99 percent teaser means little if the indexed rate is 9.5 percent with an 18 percent cap.
How to compare lenders
Compare APR, not just rate, because APR folds in fees. Get quotes on identical terms: same amount, same draw assumptions for HELOCs, same day. Ask each lender for the margin, index, caps, annual fee, early termination fee, and minimum draw requirements.
Do not let five lenders pull your credit on five different weeks. Rate-shop inside a focused 14 to 30 day window so the inquiries count as one for scoring purposes. And read the fine print on minimum draws: some HELOCs require an initial draw of $10,000 or more, which starts interest immediately.
Skip the arithmetic
See what different rates do to your payment with the free home equity calculator.
Home equity rate questions
Are home equity loan rates higher than mortgage rates?
If your first mortgage is at 6.5 percent, expect home equity loan quotes notably above that. The second lien means the lender recovers later in a foreclosure, so they charge for the risk. HELOC variable rates can start closer to mortgage rates but move with prime.
Will home equity rates go down?
Nobody can time this reliably. If you need the money for a real purpose, compare today's offers against your alternatives rather than waiting on forecasts. For HELOCs, focus on the margin, which stays yours regardless of where prime goes.