A home equity loan allows you to borrow money by using your home’s equity, which is the value of your property minus what you owe on your mortgage. Similar to home equity lines of credit (HELOCs), these loans are secured by your home, meaning your property acts as collateral.
Typically, home equity loans offer lower interest rates compared to personal loans or credit cards. This is because they are secured loans, making them less risky for lenders. However, the risk is that if you fail to make payments, your home could be at risk.
I’ve consulted with financial experts to dive into the pros and cons of home equity loans, how they work, and where to find the best rates. Here’s what I’ve learned.
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Current Home Equity Loan Rates This Week
Here are the average home equity loan rates and home equity line of credit (HELOC) rates as of February 19, 2025:
| Loan Type | This Week’s Rate | Last Week’s Rate | Difference |
|---|---|---|---|
| 10-year, $30,000 home equity loan | 8.54% | 8.55% | -0.01% |
| 15-year, $30,000 home equity loan | 8.49% | 8.50% | -0.01% |
| $30,000 HELOC | 8.28% | 8.29% | -0.01% |
Current Home Equity Loan Rates and Market Trends for 2025
Since March 2022, the Federal Reserve has been raising borrowing costs by increasing its benchmark rate in an effort to combat inflation. While inflation has eased, the home equity loan rates have remained high for borrowers. However, with the Fed now reducing interest rates, borrowing costs for financial products like home equity loans and HELOCs are expected to decrease.
In recent years, home equity loans have become a preferred borrowing option due to their lower interest rates compared to other loan types. A significant benefit of a home equity loan is that homeowners can tap into their property’s equity without the need to refinance.
“Most homeowners with mortgages are opting for home equity loans or HELOCs rather than a cash-out refinance to maintain their favorable interest rates,” explained Vikram Gupta, head of home equity at PNC Bank.
Top Home Equity Loan Rates for 2025
Here are the best home equity loan rates as of February 4, 2025, along with loan amounts, terms, and maximum LTV ratios for various lenders:
| Lender | APR | Loan Amount | Loan Terms | Max LTV Ratio |
|---|---|---|---|---|
| U.S. Bank | From 7.65% | Not specified | Up to 30 years | Not specified |
| TD Bank | 7.99% (0.25% autopay discount included) | From $10,000 | 5 to 30 years | Not specified |
| Connexus Credit Union | From 7.31% | From $5,000 | 5 to 15 years | 90% |
| KeyBank | From 9.59% (0.25% autopay discount included) | From $25,000 | 1 to 30 years | 80% for standard loans, 90% for high-value loans |
| Spring EQ | Fill out application for personalized rates | Up to $500,000 | Not specified | 90% |
| Third Federal Savings & Loan | From 6.99% | $10,000 to $200,000 | Up to 30 years | 80% |
| Frost Bank | From 7.32% (0.25% autopay discount included) | $2,000 to $500,000 | 15 to 20 years | 90% |
| Regions Bank | From 6.75% to 14.125% (0.25% autopay discount included) | $10,000 to $250,000 | 7, 10, 15, 20, or 30 years | 89% |
| Discover | From 7% for first liens, from 8% for second liens | $35,000 to $300,000 | 10, 15, 20, or 30 years | 90% |
| BMO Harris | From 8.97% (0.5% autopay discount not included) | From $25,000 | 5 to 20 years | 80% |
Note: The APRs listed above are current as of February 4, 2025. Your APR will depend on various factors such as your credit score, income, loan term, and whether you enroll in autopay or meet other lender-specific criteria.
Top Home Equity Loan Lenders to Consider in 2025
U.S. Bank
U.S. Bank, the fifth-largest banking institution in the U.S., provides both home equity loans and HELOCs across 47 states. Applications can be completed online, by phone, or in person. If you’re interested in receiving a loan estimate without a full application, you can get one by speaking with a banker.
- APR: From 7.65%
- Max LTV ratio: Not specified
- Max debt-to-income ratio: Not specified
- Min credit score: 660
- Loan Amount: $15,000 to $750,000 (up to $1 million for properties in California)
- Term Lengths: Up to 30 years
- Fees: None
- Additional Requirements: Subject to credit approval
- Perks: Get a 0.5% rate discount by enrolling in automatic payments from a U.S. Bank checking or savings account.
TD Bank
TD Bank, primarily operating on the East Coast, provides home equity loans and HELOCs in 15 states. You can apply online, by phone, or in person at a TD Bank branch. The online application features a calculator to estimate the maximum amount you can borrow based on the details you provide, along with a complete breakdown of rates, fees, and monthly payments. No credit check is required for this service.
- APR: From 7.99% (includes 0.25% autopay discount)
- Max LTV ratio: Not specified
- Max debt-to-income ratio: Not specified
- Min credit score: Not specified
- Loan Amount: From $10,000
- Term Lengths: 5 to 30 years
- Fees: $99 origination fee at closing; closing costs apply to loan amounts over $500,000
- Additional Requirements: Loans under $25,000 are only available for primary residence properties
- Perks: Receive a 0.25% discount by enrolling in autopay from a TD Bank personal checking or savings account.
Connexus Credit Union
Connexus Credit Union, available in all 50 states, offers home equity loans and HELOCs in 46 states (excluding Alaska, Hawaii, Maryland, and Texas). With over 6,000 local branches, Connexus provides a three-step application process, available online or in person. However, you cannot view personalized rates or product terms without a credit check.
- APR: From 7.31%
- Max LTV ratio: 90%
- Max debt-to-income ratio: Not specified
- Min credit score: Not specified
- Loan Amount: From $5,000
- Term Lengths: 5 to 15 years
- Fees: No annual fee; closing costs range from $175 to $2,000, depending on loan terms and property location. Other fees include a $15 returned payment fee, $9.95 convenience fee (for debit/credit card payments online), $14.95 for phone payments, and a $12 forced-place insurance processing fee.
- Additional Requirements: Connexus products are available only to members. Membership eligibility is easy to achieve by joining one of Connexus’s partner groups, residing in qualifying areas, or donating $5 to the Connexus Association.
- Perks: Flexible membership options for easy access.
KeyBank
KeyBank, headquartered in Cleveland, provides home equity loans to customers in 15 states and HELOCs to those in 44 states. KeyBank offers multiple HELOC options and allows you to apply for different products simultaneously through their application. If you’re unsure whether KeyBank loans are available in your area, the application will tell you once you enter your ZIP code. Existing KeyBank customers can also import personal details from their account to expedite the process.
- APR: From 9.59% (includes 0.25% client discount)
- Max LTV ratio: 80% for standard home equity loans, 90% for high-value home equity loans
- Max debt-to-income ratio: Not specified
- Min credit score: Not specified
- Loan Amount: From $25,000
- Term Lengths: 1 to 30 years
- Fees: $295 origination fee. Closing costs not specified
- Additional Requirements: Borrowers must be at least 18 years old and reside in one of KeyBank’s operating states.
- Perks: A 0.25% rate discount for clients with eligible checking and savings accounts.
Spring EQ
Spring EQ, established in 2016, serves customers across 38 states and offers both home equity loans and HELOCs. Unlike other lenders, Spring EQ doesn’t post its rates online. Instead, you’ll need to complete an application to receive a personalized rate. However, the application process is straightforward, allowing you to view a detailed breakdown of your loan terms and rate options without the need for a credit check or Social Security number.
- APR: Not specified
- Max LTV ratio: 90%
- Max debt-to-income ratio: 50%
- Min credit score: 640
- Loan Amount: Up to $500,000
- Term Lengths: Not specified
- Fees: An origination fee of $995 and an annual fee of $99 in some states
- Additional Requirements: Rates are not disclosed online—complete an application to receive personalized rate information.
- Perks: Higher maximum DTI ratio (50%) compared to the typical 43% offered by other lenders.
Third Federal Savings & Loan
Third Federal Savings & Loan, established in 1938, provides home equity loans in eight states and HELOCs in 26 states. One of the standout features of Third Federal is its lowest rate guarantee on both home equity loans and HELOCs. If Third Federal can’t offer you the lowest interest rate compared to similar lenders, they’ll pay you $1,000. You can apply for a loan or HELOC directly on their website without the need to create an account, though you can save your progress and return later.
- APR: From 6.99%
- Max LTV ratio: 80%
- Max debt-to-income ratio: Not specified
- Min credit score: Not specified
- Loan amount: $10,000 to $200,000
- Term lengths: 5 to 30 years
- Fees: $65 annual fee (waived for the first year), no application, closing, or origination fees.
- Additional requirements: Specific requirements are not listed.
- Perks: A 0.25% rate discount for setting up autopay from an existing Third Federal account.
Frost Bank
Frost Bank offers home equity loans and HELOCs exclusively to Texas residents. The application process is straightforward and can be completed in about 15 minutes on the Frost Bank website, but you will need to create an account to apply.
- APR: From 7.32% (0.25% autopay discount included, only for second liens)
- Max LTV ratio: 90%
- Max debt-to-income ratio: Not specified
- Min credit score: Not specified
- Loan amount: $2,000 to $500,000
- Term lengths: 15 or 20 years
- Fees: No application fee, annual fee, or closing costs; however, a $15 monthly service fee applies (can be waived with a Frost Plus Account).
- Additional requirements: Must reside in Texas and provide proof of homeowners insurance.
- Perks: 0.25% rate discount for clients who enroll in autopay from a Frost Bank checking or savings account (only available for second liens).
Regions Bank
Regions Bank is one of the nation’s largest financial service providers, offering home equity loans and HELOCs in 15 states. The bank provides multiple ways to apply: online, in person, or over the phone. Before applying, you can use the bank’s rate calculator to estimate your rate and monthly payments.
- APR: From 6.75% to 14.125% (0.25% autopay discount included)
- Max LTV ratio: 89%
- Max debt-to-income ratio: Not specified
- Min credit score: Not specified
- Loan amount: $10,000 to $250,000
- Term lengths: Seven, 10, 15, 20, or 30 years
- Fees: No closing costs or annual fees; late fees are 5% of the payment amount.
- Additional requirements: Not specified.
- Perks: Regions Bank will pay all closing costs for home equity loans.
Discover
Discover is widely known for its credit cards, but it also offers home equity loans in 48 states (no HELOCs). The application process can be completed online or over the phone, taking around six to eight weeks in total.
- APR: From 7% for first liens, from 8% for second liens
- Max LTV ratio: 90%
- Max debt-to-income ratio: 43%
- Min credit score: 680
- Loan amount: $35,000 to $300,000
- Term lengths: 10, 15, 20, or 30 years
- Fees: None (No origination, application, appraisal fees, or mortgage taxes)
- Additional requirements: Specific requirements not listed.
- Perks: No origination fees, application fees, appraisal fees, or mortgage taxes.
BMO Harris
BMO Harris offers home equity loans and three variations of a HELOC, available in 48 states (all but New York and Texas). You can apply for these products online or in person, but personalized rates require speaking with a representative by phone. Rates are provided without a hard credit check.
- APR: From 8.97% (0.5% autopay discount not included)
- Max LTV ratio: Not specified
- Max debt-to-income ratio: Not specified
- Min credit score: 700
- Loan amount: From $5,000
- Term lengths: Five to 20 years
- Fees: No application fee. BMO Harris covers closing costs for loans secured by owner-occupied 1-to-4-family residences. Recoupment fees may apply if the loan is paid off within 36 months.
- Additional requirements: Home equity loans are only available as second liens (not for mortgage-free properties).
- Perks: 0.5% rate discount for enrolling in autopay with a BMO Harris checking account.
Top Reasons to Consider Getting a Home Equity Loan
A home equity loan can be a great option when you need a significant amount of cash up front. This loan allows you to access the equity in your home, and you can use the funds for a variety of purposes. However, it’s important to consider the most practical ways to utilize this money.
- Home improvements and renovations: A home equity loan is ideal for funding projects like remodeling your kitchen, installing solar panels, or adding a new bathroom. You can even deduct the interest you pay on the loan during tax season, as long as the improvements increase your home’s value and meet IRS guidelines.
- Debt consolidation: Using a home equity loan to consolidate high-interest debt is a smart strategy. By combining multiple loans into one, you can lower your interest rate and pay off your debt faster. Home equity loans typically offer lower rates than credit cards, saving you money in the long run. However, keep in mind that failing to make payments could risk your home, unlike other types of debt.
- College tuition: A home equity loan can help cover college tuition if you’ve exhausted other options, like federal student loans. Although federal loans usually offer better terms and protections, a home equity loan can be a practical solution when you need additional funds.
- Medical expenses: Instead of using a credit card to pay for unexpected medical costs, consider tapping into your home equity. If you have large medical bills, a home equity loan can help you pay them off. Before going this route, it’s wise to ask your healthcare provider about possible payment plans.
- Starting a business: If you’re looking to start a small business or side project, a home equity loan can provide the necessary capital. However, there may be better options, such as small business loans, which typically carry less risk.
- Buying a second home: Home equity loans can also be used for a down payment on a second property or investment home. But it’s crucial to ensure you can manage multiple mortgage payments before making such a decision.
Experts advise against using a home equity loan for things like vacations or weddings. Instead, try saving up for these expenses to avoid taking on more debt.
Pros And Cons of a Home Equity Loan
Pros:
- One lump sum payment: You receive the full loan amount upfront, making it easier to manage large expenses.
- Fixed interest rate: This ensures your monthly payments remain predictable, as the rate won’t change during the loan period.
- Lower interest rates: Home equity loans often come with lower interest rates compared to credit cards or personal loans, saving you money in the long run.
- Flexible use of funds: There are typically no restrictions on how you can use the money, giving you the freedom to spend it on whatever you need.
Cons:
- Home as collateral: Since your home secures the loan, failing to repay could result in the loss of your property.
- Additional mortgage payment: If you still have a mortgage, a home equity loan adds another payment, potentially increasing your financial burden.
- Closing costs and fees: Home equity loans may come with closing costs and other associated fees that can add to the overall expense.
- Qualification requirements: If you don’t have enough equity in your home, qualifying for a home equity loan may be challenging.
Home Equity Loan vs. HELOC: Key Differences Explained
Home Equity Loan vs. HELOC: Understanding the Key Differences
Both home equity loans and HELOCs allow you to tap into your home’s equity and require your home as collateral. However, they differ in how you receive the funds and how you repay them.
A home equity loan provides the money in one lump sum, while a HELOC allows you to access funds over a longer period, often 10 years, in smaller installments. Additionally, home equity loans have fixed interest rates, ensuring your monthly payments remain stable, whereas HELOCs typically have variable interest rates that fluctuate with market conditions.
When a Home Equity Loan is a Better Choice:
- You want predictable payments: With a fixed-rate loan, your monthly payments will not change, even if interest rates rise.
- You need a lump sum: Receive the entire loan amount upfront to cover one-time expenses.
- You have a fixed amount in mind: If you know exactly how much money you need, a home equity loan can be a straightforward option.
When a HELOC is a Better Choice:
- You need access to funds over time: Withdraw money as needed and only pay interest on the amount you borrow, not the full loan amount.
- You want a lower initial interest rate: HELOCs usually offer a lower introductory rate, helping you save on interest in the early years, though rates can rise over time.
Home Equity Loans vs. Cash-Out Refinances: Which is Right for You?
A cash-out refinance involves replacing your existing mortgage with a new one, often to secure better terms or a lower interest rate. However, unlike a typical refinance, a cash-out refinance allows you to borrow more than you owe on your mortgage. The additional amount, which represents the equity you’ve already built in your home, is given to you as a cash payout.
For instance, if your home is valued at $450,000 and you owe $250,000 on your mortgage, you would refinance for the full $450,000. Your new mortgage would pay off the original $250,000 loan, and you’d receive the $200,000 in equity as cash.
While both a cash-out refinance and a home equity loan offer lump sums of cash that you repay in fixed amounts, they differ in how they affect your payments. A cash-out refinance replaces your current mortgage, so the cash payout is added to the balance of your new loan, typically leading to a higher monthly mortgage payment. On the other hand, a home equity loan does not replace your mortgage. Instead, it adds a separate monthly payment to your expenses.
Who qualifies for a home equity loan?
Qualifying for a home equity loan typically involves meeting several criteria, although requirements may vary by lender.
- Home Equity: You’ll generally need to have at least 15% to 20% equity built up in your home. This is the portion of the home you own outright after subtracting what you owe on your mortgage and other loans from the current appraised value of your house.
- Income and Employment: A steady job and verifiable income are essential to qualify for a home equity loan. Lenders will require proof of income, which may include pay stubs, tax returns, or other financial documents.
- Credit Score: A minimum credit score of 620 is usually required. A higher score, particularly above 700, may help you secure a better interest rate and more favorable loan terms.
- Debt-to-Income Ratio (DTI): Your DTI ratio should be 43% or lower. This ratio is calculated by dividing your total monthly debts by your gross monthly income. Many lenders prefer a DTI of 36% or less.
A home equity loan might be more suitable for you if:
- You don’t want to deal with private mortgage insurance (PMI), which may be required for a cash-out refinance.
- Refinancing isn’t an option due to rising interest rates that would increase your mortgage payments. A home equity loan allows you to borrow only the cash you need without changing your current mortgage terms.
On the other hand, a cash-out refinance may be the better choice if:
- Refinancing would give you a lower interest rate than your existing mortgage, potentially saving you money in interest.
- You prefer making only one monthly payment by adding the borrowed amount to your current mortgage balance.
- You have less-than-perfect credit or a high DTI. Cash-out refinances often have more lenient eligibility requirements compared to home equity loans.
- You want to take advantage of potentially lower interest rates compared to those offered by home equity loans.
Questions to Ask When Choosing a Mortgage Lender
When considering a home equity loan, it’s essential to choose a financial institution that aligns with your needs. Besides mortgage lenders, you can also explore banks, credit unions, and online-only lenders.
Rob Cook, vice president of marketing, digital and analytics for Discover Home Loans, advises, “Select a lender that makes you feel comfortable and informed throughout the process. Look at the tools they provide to help you make an informed decision. For many borrowers, the ability to apply and manage their application online is crucial.”
One option is to consider working with the lender that originated your first mortgage. This can be advantageous as you already have a relationship and a history of on-time payments with them. Additionally, many banks and credit unions offer discounted rates and other benefits if you are a customer.
It’s important to weigh both interest rates and fees. While some lenders may offer lower rates, they could have higher fees, and vice versa. The annual percentage rate (APR) is a key factor as it reflects both interest rates and any additional fees.
Before proceeding, ensure the loan terms align with your budget. For instance, verify that the minimum loan amount isn’t more than you need, and ensure the repayment term is manageable. Shorter terms lead to higher monthly payments, so make sure the term works within your budget.
Costs and fees should also be thoroughly reviewed, says Cook. Understand any upfront fees, ongoing charges, and possible prepayment penalties for paying off the loan early.
To secure the best rate, it’s critical to shop around and speak to multiple lenders to find the most suitable option for your situation.
How to Apply For a Home Equity Loan
Applying for a home equity loan follows a process similar to applying for a mortgage loan. To qualify, you’ll need a solid credit score and proof of sufficient income to repay the loan.
- Compare lenders: Speak to multiple lenders to find the best rates and fees. The more lenders you consult, the higher your chances of securing favorable terms.
- Ensure you have enough equity: Lenders typically require at least 15% to 20% equity in your home. Once that’s established, they’ll assess your credit score, income, and debt-to-income (DTI) ratio to determine eligibility and your interest rate.
- Prepare financial documents: Have your pay stubs, W-2 forms, proof of homeownership, and the appraised value of your home ready for submission.
- Close on the loan: Once your application is processed, you’ll proceed to close on the loan. In some states, this may require an in-person meeting at a branch to finalize the process.