April 5, 2024—Rates Rise – Forbes Advisor – Technologist

Home equity loans and home equity lines of credit are two products that let homeowners tap into their home equity. What’s the difference?

A home equity loan is a fixed-rate, lump sum loan that is secured by the borrower’s equity in their home. This type of loan enables a homeowner to borrow up to 85% of their home equity and pay it back in monthly installments over a period of five to 30 years, depending on the loan term.

A home equity line of credit (HELOC) is a variable-rate second mortgage that utilizes a portion of your home’s value through a revolving line of credit. You can use, pay down and reuse the credit line during a set time period as needed.

Related: Best Home Equity Loan Lenders

$100K HELOC Rates

—Ideal for Medium-Sized Projects

A $100K HELOC is suitable for more extensive renovation projects or other significant financial needs. Compare the rates and terms to find the best fit for your situation.

$250K HELOC Loan Rates

—Access More Funds for Major Investments

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

$500K HELOC Loan Rates

—Maximize Your Borrowing Power

If you have substantial equity in your home and need significant financing, a $500K HELOC offers a great deal of borrowing power. Evaluate these options to find the optimal rate and term for your goals.

*Data accurate as of April 4, 2024

5-Year Home Equity Loan Rates (60 Months)

A 5-year term offers a shorter repayment period with typically higher monthly payments. These products are suitable for borrowers looking for a quicker payoff.

10-Year Home Equity Loan Rates (120 Months)

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

15-Year Home Equity Loan Rates (180 Months)

A 15-year term provides lower monthly payments compared to shorter terms, offering more affordability while still progressing toward your financial goals.

20-Year Home Equity Loan Rates (240 Months)

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

30-Year Home Equity Loan Rates (360 Months)

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

*Data accurate as of April 4, 2024

What Is Home Equity?

Your home equity is the appraised value of your home minus your remaining mortgage balance, usually expressed as a percentage. You’ll continue to build your home equity as long as you make on-time monthly payments and your home doesn’t vastly depreciate over time. Once you’ve paid your loan in full, you own all the equity in your home.

Why Is Home Equity Important?

Home equity is important because it signifies how much wealth you have based on how much of your home you own. The more equity you have, the more wealth you’ve accumulated.

If you ever need to utilize your home equity, you can tap into it with a home equity loan or home equity line of credit. You might also want to explore a cash-out refinance as an option to use your home’s equity.

How Do I Calculate Home Equity?

You’ll calculate your home equity by taking your home’s current value—based on its most recent appraisal—and subtracting it from your current mortgage balance.

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