Both a home equity loan and a home equity line of credit (HELOC) are financial products allowing you to tap equity you’ve built in your home by paying down your mortgage or buying with cash. As such borrowing is secured by your home, interest rates can oftentimes be lower than if you were to borrow money with an unsecured loan.
A major difference between the two is that a home equity loan is a one-time disbursement of funds, while a HELOC is a revolving line of credit you can borrow against multiple times. If you’re wondering whether this is a good time to access your equity, we’ll take a look at average rates nationwide according to the Mortgage Research Center.
Fortune reviewed the latest data available from MRC as of Aug. 21, 2026. These rates are national averages based on an owner-occupied, single-family home with an 80% loan-to-value ratio, a $350,000 loan ($850,000 for non-conforming loans), and a 30- to 60-day rate lock. They assume FICO scores of 620 or higher.
Your unique rate will depend on factors such as your credit profile, the amount of equity you have in your home, your debt-to-income ratio, the loan amount and term you choose, and the type of property you’re borrowing against. Also, if your home is worth less than what you owe, or if you’re borrowing against a second home or investment property, expect your rate to run higher than these averages.
How home equity loans work
A home equity loan is effectively a secured loan.
As you’ve paid down your mortgage through the years, and perhaps made improvements to your property, you’ve built equity in the home. A home equity loan lets you borrow against a portion of that equity.
When you take out a home equity loan, the lender will deposit a lump sum into your bank account. It’s yours to do essentially whatever you like with it—from paying down high-interest credit cards to putting a swimming pool in the back yard to investing in another property. The financial institution will put you on an installment plan of equal monthly payments, sometimes up to 30 years long.
How HELOCs work
A home equity line of credit (HELOC) operates similarly to a standard home equity loan by lending you some of the equity you’ve built in your property. But instead of a lump sum deposited into your bank account, you’ll receive the funds as a revolving credit line.
The loan works sort of like a credit card; you can borrow what you need and the rest will stay in reserve on your credit line. You’re only charged interest on the amount you’re actually using.
A HELOC generally consists of two phases, as follows:
- The “draw” period – This starts immediately after you open the loan. It may last up to 10 years, depending on the lender. During the draw period, you can generally borrow from and repay your credit line as often as you want.
- The “repayment” period – After the draw period, you can no longer borrow from your credit limit. You’ll have to begin repaying any outstanding balance, either all at once or through equal monthly installments.
What is the advantage of borrowing from your home equity?
Borrowing from your home equity can be advantageous for a few reasons.
First, a home equity loan tends to have lower interest rates than, say, a traditional personal loan. That’s because it’s a “secured” loan, which tends to have lower interest rates than unsecured personal loans. You may save considerable money in interest charges by pulling from your home’s value instead of applying for an unsecured personal loan.
Also, you may be able to borrow significantly more from a home equity loan or HELOC than you can with a personal loan. Lenders often cap your borrowing amount for a personal loan at $100,000 or less—but depending on the amount of home equity you’ve built, you may be approved for a home equity loan or HELOC worth many times more than that.
What are the risks associated with borrowing from your home equity?
For all the benefits that come with borrowing against your home, it’s far from a no-brainer in every situation. Tapping home equity can be one of the riskiest types of financing available, as the consequences of defaulting on what you owe can result in you losing your property.
When you borrow from home equity, you’re effectively giving the lender your house as collateral. If you fall behind on your payments for long enough, the lender can sell your home to get its money back. In other words, you could be kicked out of your house and lose everything—and even owe money if foreclosure doesn’t fully cover your outstanding balance. Your credit will also suffer for a long time, making it difficult to pursue another mortgage in the near future.
Home equity loans and HELOCs often also cost money to open. You may find yourself shelling out for fees associated with setting up the loan, running your credit, appraising your property, and handling paperwork. Expect to pay between 2% and 5% of the total loan amount in closing costs.
The takeaway
If you’re looking for a relatively inexpensive loan, ideally to fund pursuits that will either increase your net worth or reduce your high-interest debt, borrowing from your home’s equity may be a smart move. By staying on top of home equity loan and HELOC interest rates, you’ll recognize when it’s a good time to apply.
Just be aware of possibly dire consequences if you fail to stay current on your loan; you could lose your home, and even end up owing money after foreclosure if your property sells for less than your full balance.
As long as you’ve taken a clear-eyed look at the situation and have mapped out a realistic path to repay what you borrow, a home equity loan or a HELOC can be a useful financial tool.
Frequently asked questions
How soon can I tap my home equity?
You can typically tap your home equity as soon as you’ve built at least 15% to 20% equity (depending on the lender). Most banks want you to keep at least this much equity in your home at all times.
How do you qualify for a home equity loan or HELOC?
To qualify for a home equity loan or HELOC, you generally must have a solid credit score, a manageable debt-to-income ratio (DTI), and steady, predictable income. You must also have built more than 15% to 20% equity.
How do I calculate my home equity?
To calculate your home equity, simply subtract the amount you still owe on your mortgage from the current estimated value of your home. For example, if your home is worth $350,0000 and you still owe $200,000 on your mortgage, you have $150,000 in equity.