Home Equity Loan Options
Borrowing against your home’s equity can provide access to funds for major expenses, but the right option depends on how you plan to use the money and manage repayment. Understanding how rates, fees, and terms work can help you compare a home equity loan and a HELOC more confidently.
Many U.S. homeowners consider tapping built-up value in their property when they need funds for renovations, debt consolidation, or other large costs. Two common options are a home equity loan (a lump sum with fixed payments) and a home equity line of credit (HELOC), which works more like a revolving credit line. Both can be useful, but they come with rate and cost details that matter.
How do home equity loan rates work?
Home equity loan rates are usually fixed, meaning the interest rate and monthly principal-and-interest payment stay the same for the life of the loan. Lenders typically set rates based on market conditions, your credit profile, your debt-to-income ratio, and how much equity you’re leaving in the home after borrowing. A smaller loan amount can sometimes carry a higher rate, while strong credit and lower overall debt can improve pricing.
When comparing home equity loan rates, it helps to look beyond the headline rate and focus on the annual percentage rate (APR), which can reflect certain lender fees. Also pay attention to loan term length: longer terms can lower monthly payments but increase total interest paid over time. Because the loan is secured by your home, missed payments can put the property at risk, so affordability under your regular monthly budget is as important as the rate.
When does a home equity line of credit make sense?
A home equity line of credit is typically structured with a draw period (when you can borrow as needed up to a limit) followed by a repayment period (when you repay what you borrowed, often with payments that may rise). HELOCs are often variable-rate, so the interest rate can change over time. This flexibility can be helpful when costs come in phases—such as staged home improvements—because you may only pay interest on the amount you actually draw.
A practical way to compare a HELOC to a home equity loan is to match the product to your spending pattern and risk tolerance. If you need a one-time lump sum and prefer stable payments, a fixed-rate loan may feel easier to plan around. If you want ongoing access to funds, a HELOC’s revolving structure may fit better—but it also adds variability, so it’s wise to consider whether you could handle higher payments if rates rise.
What to know about HELOC rates and total cost
HELOC rates commonly move with a benchmark rate (often the prime rate) plus a lender margin based on your credit and loan-to-value (LTV). That means two borrowers can see different offers at the same bank, and your rate can change over time even if your personal finances stay the same. Total cost can also include appraisal charges, title-related fees, recording fees, and potential ongoing costs like annual fees or inactivity/early-closure fees—details that can vary by lender and by state.
Real-world pricing for both home equity loan rates and HELOC rates is usually best understood as a range rather than a single number, because lenders price by credit score band, combined LTV, occupancy (primary residence vs. second home), and documentation. In many cases, HELOC pricing is quoted as “prime + margin,” while home equity loans are quoted as a fixed APR for a chosen term. Asking lenders for a Loan Estimate (or equivalent fee and APR breakdown) can make it easier to compare offers on equal footing.
| Product/Service | Provider | Cost Estimation |
|---|---|---|
| Home equity loan | U.S. Bank | Fixed APR varies by credit/LTV and term length; third-party closing costs may apply depending on state and transaction details. |
| HELOC | Bank of America | Variable APR commonly structured as prime rate plus a margin; potential fees depend on setup and account terms. |
| HELOC | Wells Fargo | Variable APR typically tied to prime rate plus a margin; closing and account-related fees vary by location and borrower profile. |
| HELOC | Navy Federal Credit Union | Variable APR often prime-based with a margin; membership eligibility applies and fees vary by product terms. |
| Home equity loan | PNC Bank | Fixed APR varies by credit/LTV and term; appraisal/title/recording costs may apply depending on state. |
| HELOC | TD Bank | Variable APR generally benchmark-based with a margin; availability and fees can vary by region and account structure. |
Prices, rates, or cost estimates mentioned in this article are based on the latest available information but may change over time. Independent research is advised before making financial decisions.
Choosing among home equity loan options comes down to matching the product structure to your needs and your comfort with rate changes. A fixed-rate home equity loan can simplify budgeting, while a HELOC can provide flexibility if your expenses are spread out over time. In either case, comparing APR, term structure, and fee details—and stress-testing your budget for higher payments—can help you make a more informed decision.
