Second mortgage products, such as HELOCs and home equity loans, are becoming increasingly popular as primary mortgage rates are stubbornly stuck above 6%. At the same time, the prime rate, which serves as the benchmark for pricing home equity line of credit (HELOC) and loan products, is currently near a three-year low.
According to real estate analytics firm Curinos, the average HELOC rate stands at 7.20%, with a 52-week low of 7.19% in mid-January. On the other hand, the national average rate for a home equity loan is 7.47%, with a low of 7.38% recorded in early December 2025. 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%.
With primary mortgage rates remaining high, homeowners with substantial home equity and a low primary mortgage rate may find it frustrating to not be able to access the growing value in their home. In such cases, a second mortgage in the form of a HELOC or home equity loan can provide a viable solution.
Home equity interest rates are calculated differently than primary mortgage rates. Second mortgage rates typically consist of an index rate plus a margin. The index rate is often the prime rate, which currently sits at 6.75%. For example, if a lender adds a margin of 0.75%, the HELOC rate would be 7.50%. Home equity loans, being fixed-interest products, may have different margin calculations.
It’s essential to note that each lender has its pricing methodology for second mortgage products, so it’s crucial to shop around for the best rates. Factors such as credit score, debt amount, and credit line compared to the home value can influence the rate offered. Additionally, national average HELOC rates may include introductory rates that could transition to adjustable rates after a specified period.
The best HELOC lenders typically offer low fees, a fixed-rate option, and generous credit lines. These flexible products allow homeowners to tap into their home equity as needed, up to the credit line limit. When comparing lenders, look for below-market introductory rates that can provide savings in the initial period.
On the other hand, home equity loans offer a fixed rate for the entire repayment period, eliminating the need to worry about fluctuating rates. The lump sum nature of home equity loans also means there are no minimum draw requirements to consider.
Rates for second mortgages can vary significantly between lenders and locations, ranging from around 6% to as high as 18%. It’s crucial to compare rates and terms to secure the most favorable option based on creditworthiness and diligence in shopping around.
For homeowners with low primary mortgage rates and substantial equity in their homes, now may be an opportune time to consider a HELOC or home equity loan. By leveraging the equity in their homes, homeowners can use the funds for home improvements, repairs, upgrades, or any other financial needs.
It’s essential to consider the variable nature of HELOC rates, which can impact monthly payments over the repayment period. While HELOCs offer flexibility, they are best suited for borrowing and repaying the balance within a shorter timeframe to avoid long-term interest costs.
In conclusion, second mortgage products like HELOCs and home equity loans present valuable options for homeowners looking to access their home equity. By understanding the intricacies of these products and comparing rates from different lenders, homeowners can make informed decisions to leverage their home equity effectively.
