Home equity lines of credit (HELOCs) and home equity loans are starting off 2026 with national average rates in the mid-7% range, making both options more affordable than they have been in recent years. According to real estate analytics firm Curinos, the average HELOC rate is 7.44%, while the national average rate for a home equity loan is 7.59%. These rates are based on applicants with a minimum credit score of 780 and a maximum combined loan-to-value ratio (CLTV) of less than 70%.
Deciding between a HELOC and a home equity loan is a relatively straightforward process. A HELOC allows you to access funds as needed from your approved line of credit, while a home equity loan provides a lump sum amount upfront.
With mortgage rates remaining stagnant, many homeowners with substantial home equity may feel frustrated at not being able to access that growing value in their homes. For those unwilling to give up their low primary mortgage rate, a second mortgage in the form of a HELOC or home equity loan can be a viable solution.
The Federal Reserve estimates that homeowners have a staggering $36 trillion of equity tied up in their homes. A second mortgage enables U.S. homeowners to unlock this record-setting equity they have built up over time.
HELOC interest rates differ from primary mortgage rates, as they are based on an index rate plus a margin. Typically, the prime rate serves as the index, which currently sits at 6.75%. If a lender adds a margin of 0.75%, the HELOC rate would be 7.50%. On the other hand, a home equity loan may have a different margin as it is a fixed-interest product.
Lenders have flexibility in pricing second mortgage products like HELOCs and home equity loans, so it’s advisable to shop around. Your specific rate will depend on factors such as your credit score, existing debt levels, and the ratio of your credit line to your home’s value.
Average national HELOC rates may include introductory rates that last for a limited period before converting to an adjustable rate, likely starting higher. Home equity loans, with fixed rates, typically do not offer introductory teaser rates.
The top HELOC lenders provide low fees, a fixed-rate option, and generous credit lines. A HELOC allows you to leverage your home equity as needed, up to your credit limit, offering flexibility in accessing funds.
Currently, FourLeaf Credit Union is offering a HELOC rate of 5.99% for 12 months on lines up to $500,000. It’s essential to be aware of both introductory and adjustable rates when comparing lenders.
The best home equity loan lenders are easier to identify as the fixed rate remains constant throughout the repayment period. With a lump sum payout, there are no draw minimums to consider, simplifying the borrowing process.
When considering a HELOC or home equity loan, it’s crucial to compare fees and repayment terms to ensure you select the most suitable option for your financial needs.
Rates can vary significantly among lenders, ranging from around 6% to as high as 18%. The national average rates for a HELOC and home equity loan currently stand at 7.44% and 7.59%, respectively, serving as useful benchmarks during the rate comparison process.
For homeowners with low primary mortgage rates and substantial home equity, now may be an opportune time to consider a HELOC or home equity loan. By leveraging the equity in your home, you can fund home improvements, repairs, and upgrades without sacrificing your favorable mortgage rate.
It’s important to note that while a HELOC may offer lower monthly payments during the draw period, the variable interest rate means payments can increase during the repayment period. HELOCs are ideal for borrowers looking to repay the balance within a shorter timeframe.
In conclusion, with competitive rates and a plethora of options available, homeowners can tap into their home equity with a HELOC or home equity loan to finance various projects and expenses. Consider your financial goals and repayment preferences when choosing between these two second mortgage products to make the most informed decision for your unique circumstances.
