Best Home Equity Loan Rates for December 2022

We want to help you make more informed decisions. Some links on this page — clearly marked — may take you to a partner website and may result in us earning a referral commission. For more information, see How We Make Money.

Your house’s value may surprise you. With home prices rising dramatically in the last few years, homeowners have seen a major increase in equity. With mortgage rates at two-decade highs, people wanting to borrow against their home are forgetting the cash-out refinance and turning instead to home equity loans. Here’s how these installment loans work, and how to find the best rates.

Interest rates are on the move!
The Federal Reserve just increased interest rates, and that could make home equity loans more expensive. Lock in a good rate now.
banner image

This Week’s Home Equity Loan Rates

Home equity loan rates are climbing given inflation and ongoing interest rate hikes by the Federal Reserve. Here are the average rates for home equity loans and HELOCs, as of Nov. 30, 2022.

Loan TypeThis Week’s RateLast Week’s RateDifference
$30,000 HELOC7.93%7.93%none
10-year, $30,000 home equity loan7.96%7.89%+ 0.07
15-year, $30,000 home equity loan7.91%7.84%+ 0.07

How These Rates Are Calculated

These rates come from a survey conducted by Bankrate, which like NextAdvisor is owned by Red Ventures. The averages are determined from a survey of the top 10 banks in the top 10 U.S. markets.

NextAdvisor’s Guide to Home Equity Loans

The Best Home Equity Loan Lenders of August 2022

Editorial Independence

As with all of our home equity loan and home equity line of credit (HELOC) lender reviews, our analysis is not influenced by any partnerships or advertising relationships. For more information about our scoring methodology, click here.

Good for wide nationwide availability
U.S. Bank
U.S. Bank
Good for wide nationwide availability
U.S. Bank
  • Products offered:
    Home equity loan, HELOC, rate-lock HELOC
  • Home equity loan terms:
    Up to 30 years
  • HELOC terms:
    10-year draw period, unspecified repayment period
  • Maximum LTV allowed:
    80%

NextAdvisor’s Take

Pros
  • Rate discount for setting up autopay from a U.S. Bank checking or savings account (home equity loans only)
  • Extensive availability nationwide (47 states for both home equity loans and HELOCs)
  • Can apply online, over the phone, or in person at a branch
  • Good price transparency
  • Many customer support options
Cons
  • There may be an annual fee for HELOCs if you don’t have a U.S. Bank Platinum Checking Package
  • Not available in TX, DE, SC
  • Potential early closure fee if you close your HELOC within 30 months of opening
The Bottom Line

Based in Minneapolis, Minnesota, U.S. Bank is the fifth largest banking institution in the U.S. It offers both home equity loans and HELOCs in 47 states, with the option of interest-only HELOCs  available to qualified borrowers. You also have the option to lock all or part of your outstanding HELOC balance into a fix-rate option during your draw period. Available loan amounts for HELOCs and home equity loans range from $15,000 to $750,000, and up to $1 million for properties in California.

There are no closing costs on home equity loans or HELOCs from U.S. Bank, but you’ll be charged an early closure fee of 1% of the line amount ($500 max) if you close your HELOC within 30 months of opening. In addition, HELOC borrowers may be charged an annual fee of up to $90, which can be waived with a U.S. Bank Platinum Checking Package. U.S. Bank offers a rate discount of 0.5% for home equity loan borrowers who set up automatic payments from a U.S. Bank personal checking or savings account.

You can apply for a home equity loan or HELOC through an online application, by phone, or by visiting a U.S. Bank branch in person. If you want a loan estimate for a home equity loan — which includes the estimated interest rate, monthly payment, and total closing costs — without completing a full application, you can get one by speaking with a banker over the phone. 

We like U.S. Bank because of its extensive nationwide availability, many customer support options, and excellent price transparency — meaning you can get a personalized rate quote and fee information just by filling out some basic information, no credit check required. 

Good for price transparency
TD Bank
TD Bank
Good for price transparency
TD Bank
  • Products offered:
    Home equity loan, HELOC, interest-only HELOC, rate-lock HELOC
  • Home equity loan terms:
    5, 10, 15, 20, or 30 years
  • HELOC loan terms:
    10-year draw period, 20-year repayment period
  • Maximum LTV:
    89.99%

NextAdvisor’s Take

Pros
  • Options to apply in person, on the phone, or online
  • 0.25% rate discount if you set up auto-pay from a TD account
  • No credit check required to see personalized rates and fees
  • Many products and options available
Cons
  • Only offered in 15 states
  • $99 origination fee for both home equity loans and HELOCs
The Bottom Line

Primarily operating on the East Coast,  TD Bank is one of the 10 largest banks in the U.S. and serves more than 9.7 million customers. TD Bank offers Home Equity Loans and HELOCs in 15 states, with the option for interest-only and rate-lock HELOCs. Loan amounts for home equity loans start at $10,000, while line amounts for HELOCs start at $25,000.

For a home equity loan or HELOC with TD Bank, closing costs only exist on loan amounts greater than $500,000, but you will be required to pay a $99 origination fee at closing regardless of your loan amount. There is also an annual fee of $50 on HELOCs unless your loan amount is less than $50,000. You’ll be charged an early termination fee of 2% of the outstanding balance if your HELOC is closed within 24 months from opening. Additionally, you’ll receive a 0.25% rate discount if you set up auto-pay from a TD personal checking or savings account. 

If you decide to apply for a TD Bank home equity loan or HELOC, you can do so online, by phone, or by visiting a TD Bank in person. The online application includes a calculator that will tell you the maximum amount you can borrow based on the information you input, but you can also see a full breakdown of rates, fees, and monthly payments by entering some basic information online. No credit check is required for this service. 

Though its nationwide availability is limited, we like TD Bank because it has a wide variety of product offerings — including interest-only and rate-lock options on its HELOCs. The bank’s good online user experience and price transparency make it easy to work with this lender,  and the customer service is very accessible.

Good for wide range of customer service options
Connexus Credit Union
Connexus Credit Union
Good for wide range of customer service options
Connexus Credit Union
  • Products offered:
    Home equity loan, HELOC, interest-only HELOC
  • Home equity loan terms:
    5 to 15 years
  • HELOC terms:
    15-year draw period, 15-year repayment period
  • Maximum LTV:
    90% for home equity loans

NextAdvisor’s Take

Pros
  • No annual fee
  • Available in 46 states
  • Excellent customer service options
  • Membership requirements are relatively easy to meet
Cons
  • Credit check required to get a personalized rate quote and product terms
  • Not available in Alaska, Hawaii, Maryland, and Texas
  • Potential for high closing costs
  • Must be a member of the credit union to get a loan
The Bottom Line

With over 420,000 members in all 50 states, Connexus Credit Union has a far reach in the United States. The credit union offers home equity loans and HELOCs in 46 states (excluding Alaska, Hawaii, Maryland, and Texas). Loan amounts for home equity loans and HELOCs range from $5,000 to $200,000. Within its HELOC product offerings is an interest-only HELOC which may allow you to pay a lower monthly payment. Since Connexus is a credit union, its products are only available to members. But, membership eligibility is open to most people: you (or a family member) just need to be a member of one of Connexus’s partner groups, reside in one of the communities or counties on Connexus’s list, or become a member of the Connexus Association with a $5 donation to Connexus’s partner nonprofit. 

Connexus does not specify any rate discounts, but it does offer an introductory rate for the first six months of your loan term. You won’t have to pay an annual fee for a home equity loan or HELOC with Connexus, but closing costs can range from $175 to $2,000 depending on your loan terms and property location. 

To apply for a home equity loan or HELOC with Connexus, you can fill out a 3-step application online. Though the application process is quick, you won’t be able to see a personalized rate or product terms without a credit check.

Connexus offers expansive nationwide availability and has several product offerings, part of the reason this lender ranked highly for us. Its straightforward application process is another bonus that makes applying for a home equity loan or HELOC easy.

Good for wide range of product offerings
KeyBank
KeyBank
Good for wide range of product offerings
KeyBank
  • Products offered:
    Home equity loan, HELOC, interest-only HELOC, rate-lock HELOC
  • Home equity loan terms:
    5 to 30 years
  • HELOC terms:
    15-year draw period, 15-year repayment period
  • Maximum LTV:
    80% for standard home equity loans and HELOCs, 90% for high-value home equity loans and HELOCs

NextAdvisor’s Take

Pros
  • Interest-only and rate-lock HELOC options
  • Streamlined application process for existing KeyBank customers
  • Smooth online user experience and website
Cons
  • High closing costs if you plan to use a closing agent
  • Annual fee for HELOCs
  • Origination fee for home equity loans
The Bottom Line

Based in Cleveland, Ohio, KeyBank has been around for nearly 190 years. KeyBank offers home equity loans to customers in 15 states and HELOCs to customers in 44 states. Aside from a standard HELOC, KeyBank also offers interest-only and rate-lock options. Home equity loan amounts of $25,000 and up are available, while HELOCs have line amounts of $10,000 and up. 

KeyBank HELOCs come with an annual fee of $50, but no closing costs unless your closing is performed by a closing agent. In that case, your closing fee could be up to $400. KeyBank offers a 0.25% rate discount for clients who have eligible checking and savings accounts with KeyBank. Additionally, home equity loans have an origination fee of $295.

The KeyBank application allows you to apply for multiple products at one time. If you’re not sure whether KeyBank loans are available in your area, the application will tell you once you input your zip code. If you’re an existing KeyBank customer, you’ll have the option to skim through the application and import your personal information from your account. 

We like KeyBank because of its extensive product offerings. The streamlined application process for existing customers is helpful, but both existing and new customers will likely be pleased with the online user experience and availability of customer service that KeyBank offers.

Good for online application user experience
Spring EQ
Spring EQ
Good for online application user experience
Spring EQ
  • Products offered:
    Home equity loan, HELOC, interest-only HELOC
  • Home equity loan terms:
    5 to 30 years
  • HELOC terms:
    10-year draw period, 20-year repayment period
  • Maximum LTV:
    90% for home equity loans, 97.5% for HELOCs

NextAdvisor’s Take

Pros
  • No credit check required to see personalized rates
  • Available in 38 states
Cons
  • Origination fee of $995
  • Minimum credit score of 620 required
  • No specified rate discounts
The Bottom Line

Spring EQ may be a relatively new bank founded in 2016, but it has already earned a positive reputation from customers across the 38 states it serves. Spring EQ offers home equity loans, HELOCs, and interest-only HELOCs, providing borrowers with flexible loan options. Home equity loan amounts range from $5,000 to $500,000, while HELOC line amounts range from $50,000 to $500,000.

Spring EQ loans may be subject to an origination fee of $995 and an annual fee of $99 in some states. Spring EQ does not specify any rate discounts.

The Spring EQ loan application process is transparent and easy to understand. Customers can see an extensive breakdown of their loan term and rate options without needing to undergo a credit check or provide their social security number. To be eligible for a home equity loan or HELOC with Spring EQ, you’ll need a credit score of 620 or higher, along with a debt-to-income ratio of 45% or less.

We ranked Spring EQ highly because of the lender’s price transparency, which allows potential borrowers to get pre-qualified for a loan with only basic information. This makes it easy to compare rates without needing to provide sensitive personal information or undergo a hard credit check. Additionally, the online experience is user-friendly and the application’s breakdown of rates, fees, and terms is easily digestible for customers.

Good for rate match guarantee
Third Federal Savings & Loan
Third Federal Savings & Loan
Good for rate match guarantee
Third Federal Savings & Loan
  • Products offered:
    Home equity loan, 5/1 home equity loan, HELOC
  • Home equity loan terms:
    5 year, 10 year, 5/1 adjustable rate (6-30 years)
  • HELOC terms:
    10-year draw period, 20-year repayment period
  • Maximum LTV:
    80%

NextAdvisor’s Take

Pros
  • No application, closing, or origination fees
  • Lowest rate guarantee
  • Smooth online application process
Cons
  • Limited geographic availability for home equity loans
  • $65 annual fee on HELOCs (waived the first year)
The Bottom Line

Opened in the midst of the Great Depression in 1938, Third Federal Savings & Loan sought to help unemployed and underemployed Ohio residents achieve home ownership. Since its opening, Third Federal has expanded significantly, now offering HELOCs in 26 states and home equity loans in eight states. Home equity loans and HELOCs are available in amounts from $10,000 to $200,000.

Home equity loans and HELOCs with Third Federal come with an annual fee of $65 (waived the first year) but no application fees, closing fees, or origination fees. If you set up autopay from an existing Third Federal account before closing, you’ll be eligible for a 0.25% rate discount. Additionally, Third Federal offers a lowest rate guarantee on its HELOCs and home equity loans, meaning Third Federal will offer you the lowest interest rate relative to other similar lenders or pay you $1,000.

You can apply for a home equity loan or HELOC on the Third Federal website. Both applications are included on the same page along with multiple rate and term options, allowing the customer to assess what will be best for them. Third Federal also provides helpful tools and tips on its application page to answer questions that borrowers may have. You won’t have to register an account to apply, but you’ll still be able to save your application and return to it later.

We like Third Federal’s application process and the lender’s price transparency. If you’re not sure what kind of home equity product you’re looking for, the website provides useful information to help you decide. Third Federal also offers a unique product not commonly found among other lenders: a 5/1 adjustable-rate home equity loan, where the rate is fixed for the first five year and then adjusts annually, much like how an adjustable-rate mortgage works. However, you won’t be eligible for this product unless you live in one of the eight states in which Third Federal offers home equity loans.

Good for Texas borrowers
Frost Bank
Frost Bank
Good for Texas borrowers
Frost Bank
  • Products offered:
    Home equity loan, HELOC, interest-only HELOC
  • Home equity loan terms:
    7 to 20 years for a second lien, 10 to 20 years for a first lien
  • HELOC terms:
    10-year draw period, 20-year repayment period
  • Maximum LTV:
    80%

NextAdvisor’s Take

Pros
  • No application fee or annual fee
  • Benefits for new and existing Frost Bank customers
  • Quick, 15-minute application process
Cons
  • Only available in Texas
  • Have to create an account to apply
The Bottom Line

Headquartered in San Antonio, Texas, Frost Bank’s products are only available to Texas residents. Among the products offered are home equity loans, HELOCs, and interest-only HELOCs. If you’re not sure which one of these products is best for you, the Frost Bank website provides a loan product selection tool to help you consider your options. Home equity loans come with loan amounts of $2,000 and up, while HELOCs come with line amounts of $8,000 and up. 

Frost Bank does not require an application fee or an annual fee. Additionally, there are no closing costs for the borrower. If you have automatic payments set up from a Frost Bank checking or savings account, you’ll be eligible for a 0.25% rate discount. 

You can apply for a home equity loan or HELOC on the Frost Bank website, but first you’ll need to create an account. According to the website, the application will only take you about 15 minutes. If you’re not located in Texas, you won’t be able to apply. 

Though Frost Bank’s nationwide availability is very limited, the bank has a helpful product selection tool, easy application process, and good price transparency. Frost Bank’s customer service is very accessible – another reason for its high rating.

Good for rate discounts
Regions Bank
Regions Bank
Good for rate discounts
Regions Bank
  • Products offered:
    Home equity loan, HELOC, rate-lock HELOC
  • Home equity loan terms:
    7,10, 15, or 20 years
  • HELOC terms:
    10-year draw period, 20-year repayment period
  • Maximum LTV:
    80%

NextAdvisor’s Take

Pros
  • No closing costs for home equity loans
  • Options to apply online, in-person, or over the phone
  • Accessible customer service options
Cons
  • Closing costs for HELOCs
  • Limited nationwide availability (15 states)
The Bottom Line

As one of the nation’s largest banking, mortgage, and wealth management service providers, Regions Bank serves customers across the South, Midwest, and Texas.  Regions offers home equity loans and HELOCs in 15 states. Its HELOC offerings also come with a rate-lock option for customers who want it. Home equity loans have loan amounts of $10,000 to $250,000 and HELOCs have line amounts ranging from $10,000 to $500,000.

For home equity loans and HELOCs, Regions offers rate discounts between 0.25% and 0.5% to those who elect to have their monthly payments automatically debited from a Regions checking account. For home equity loans, there are no closing costs. HELOCs, however, can have closing costs between $150 and $2,000, but Regions will pay these costs if the HELOC amount is $250,000 or less. 

You can apply for a Regions home equity loan or HELOC online, in-person, or over the phone. You’ll have to create an account with Regions to apply. Before you create an account, though, you can use the bank’s own rate calculator to estimate your rate and monthly payment amount. 

We like Regions because of the variety of application options it offers and the ease of applying online. Regions provides several ways to contact customer service, ensuring that customers can get questions answered quickly. Though Regions only offers its products in 15 states, it gives customers in these states the flexibility to choose between home equity loans, HELOCs, and rate-lock HELOCs.

Honorable mentions

Good for no fees or closing costs
Discover
Discover
Good for no fees or closing costs
Discover
  • Products offered:
    Home equity loan
  • Home equity loan terms:
    10, 15, 20 or 30 years
  • HELOC terms:
    N/A
  • Maximum LTV:
    Not specified

NextAdvisor’s Take

Pros
  • No origination fees or closing costs
  • Home equity loans are available in 48 states
Cons
  • Limited customer service options available
  • Home equity loans not available in Iowa and Maryland
  • Does not offer HELOCs
The Bottom Line

A financial services company known primarily for its credit cards, Discover also offers home equity loans as part of its suite of banking products. Home equity loans are available in 48 states, but the lender does not offer home equity lines of credit (HELOCs) at all. For Discover’s home equity loans, possible loan amounts range from $35,000 to $300,000. The lender charges no origination fees, application fees, appraisal fees, and mortgage taxes. 

You can apply for a home equity loan from Discover online or over the phone. The application process takes approximately six to eight weeks in total, according to Discover’s website. 

Discover offers wide nationwide availability for its home equity loans and good price transparency, but its lack of HELOC offerings may be a limiting factor for consumers looking for additional product options. In addition, Discover offers limited customer service options — your only option to get help is by phone, with no in-person service or online options like email or live chat. 

Good for high loan-to-value ratio options
BMO Harris Bank
BMO Harris Bank
Good for high loan-to-value ratio options
BMO Harris Bank
  • Products offered:
    Home equity loan, HELOC, interest-only HELOC, rate-lock HELOC
  • Home equity loan terms:
    5 to 20 years
  • HELOC terms:
    10-year draw period, 20-year repayment period
  • Maximum LTV:
    85% for HELOCs; 89.99% for most home equity loans

NextAdvisor’s Take

Pros
  • Available in 48 states
  • No hard credit check required
  • Flexible product offerings
  • Option for 100% CLTV for borrowers who meet certain qualifications
Cons
  • Limited customer service options
  • Can only receive personalized rates on the phone
  • $75 annual fee for HELOCs
The Bottom Line

As the 8th largest bank by assets in North America, BMO Harris Bank (a subsidiary of the Canadian financial services company Bank of Montreal) serves more than 12 million customers globally.  Currently, BMO Harris products and services are available in 48 states (all but New York and Texas). BMO Harris offers home equity loans and three variations of a HELOC. Loan amounts for home equity loans start at $5,000 and up while HELOC lines start at $10,000 and up. 

The normal maximum combined loan-to-value ratio allowed is 85% for HELOCs and 89.99% for home equity loans, but a 100% max CLTV option is available for low-to-moderate income borrowers or Low to Moderate Income Census Tract customers who need to make home improvements.

There is no application fee for a home equity loan or line of credit with BMO Harris. In addition, BMO Harris will pay closing costs for loans secured by an owner-occupied 1 to 4-family residence, but borrowers will have to pay a $75 annual fee for a HELOC. If you authorize auto pay from a BMO Harris checking account, you’ll be eligible to receive a 0.50% rate discount.

You can apply for a home equity loan or HELOC online or in-person, but in order to get personalized rates, you’ll have to speak with a representative on the phone. Getting personalized rates does not require a hard credit check. 

We like that BMO Harris offers both home equity loans and three types of HELOCs almost nationwide, but the lender fell short because of its low price transparency. Additionally, the online application requires your social security number and has some elements that could be confusing for customers. 

How We Chose These Lenders

NextAdvisor developed a framework to evaluate home equity lenders using a weighted average score between 1 and 5 based on the following criteria. A higher weight was given to the criteria we determined to be most important:

  1. Nationwide availability: We rated lenders on a scale of 1 to 5 based on how many states their home equity products were offered in. For lenders that only offered either home equity loans or HELOCs, we looked at how many states offered that specific product. For lenders that offered both home equity loans and HELOCs, we looked at how many states each individual product was offered in, and then took the average. A lender scored a 5 if it offered home equity products in at least 45 states which equates to 90% of U.S. states. Nationwide availability counted for 10% of the composite score.
  2. Online user experience: We rated lenders on a scale of 1 to 5 based on the user experience of their online application process. A 5 was given to lenders who had a clear, easy-to-navigate online application process with no technical issues or confusing instructions. A score of 1 was given to lenders who did not offer an online application at all, instead requiring customers to apply in person at a branch or over the phone. Online user experience counted for 20% of the composite score.
  3. Products offered: We rated lenders on a scale of 1 to 5 based on how many types of home equity products they offered. Product offerings were categorized into the following types: home equity loans; standard variable-rate, interest-and-principal HELOCs, interest-only HELOCs, HELOCs with fixed-rate or rate-lock options, and miscellaneous products that did not fall into any of the previous categories. Lenders who offered at least 4 types of products received a 5. Products offered counted for 20% of the composite score.
  4. Price transparency: We rated lenders on a scale of 1 to 5 based on their price transparency, which we defined as how much information you could get about rates and fees without a hard credit check. Comparing rates and fees from multiple lenders is one of the best ways to ensure you’re getting the best deal, and we gave high scores to lenders who made it easy to do so. On the other hand, lenders who kept detailed rate and fee information behind a hard credit check — which can slightly lower your credit score and should only be done when you’re serious about moving forward with a particular lender — scored lower. Lenders who provided personalized quotes for rates, fees, and important loan information with only basic information (and no hard credit check) required received a 5. Price transparency counted for 30% of the composite score.
  5. Customer service options: We rated lenders on a scale of 1 to 5 based on how many different customer service options were available to consumers needing help with their loan application or loan servicing. Examples of customer service options we counted included, but were not limited to, online live chat, phone, email, visiting an in-person branch, in-person or virtual appointments with dedicated loan officers, and social media direct messaging. Lenders who had five or more customer service options received a 5. For each option that was available only to existing customers (and thus would not be available to new customers needing help with the application process), we deducted 0.5 from the score. For any lender that had a 24/7 customer service option, regardless of what form that option took, we added 1 to the score. We did not evaluate the quality of the customer service itself, as that can be subjective and highly dependent on the specific customer service representative a borrower is working with. Customer service options counted for 20% of the composite score. 

What We Did Not Evaluate In Our Scoring

When comparing lenders, we did not evaluate factors like pricing (interest rates and fees) and borrower requirements (like minimum credit scores). Home equity rates and fees can change often and are based on each borrower’s specific credit profile. Each lender also has its own unique underwriting requirements and process, which are often not publicly available. Therefore, we don’t believe it’s possible to accurately evaluate rates, fees, and credit score requirements from lender to lender. It’s important to note that lower rates may not actually lower the total cost of borrowing if they’re offset by higher fees.  

If a company offered both home equity loans and HELOCs, we evaluated its home equity lending as a whole rather than any specific product. 

To find the best deal, get personalized rate and fee quotes from multiple lenders, then use NextAdvisor’s loan calculator to calculate the total cost of borrowing and monthly payment to accurately compare lenders. 

Home Equity Loans Today

Interest rates have risen across the board, making all forms of borrowing more expensive. However, home equity loan rates have risen at a slower rate, making them more attractive than their main competitor, cash-out refinancing

When mortgage interest rates were at historic lows during the pandemic, many homeowners used cash-out refinancing to get cash while simultaneously reducing their mortgage rate. With a cash-out refi, homeowners refinance for more than they owe on their existing mortgage and receive the difference as cash. Now that mortgage rates are rising, homeowners can’t always get a lower rate with a cash-out refi. Many homeowners who refinanced during the low rate environment of 2019 and 2020 don’t want to lose their current mortgage rate just to access their home equity

By contrast, second mortgages like home equity loans and home equity lines of credit (HELOCs) don’t alter a homeowner’s primary mortgage. This lets them borrow against the value of their home equity without needing to exchange their primary mortgage’s current rate for a new, higher one. Home equity loans also offer some protection from rising interest rates, in contrast to variable-rate HELOCs. That’s because most home equity loan interest rates are fixed. The rate you lock in when you take out your loan will be constant for the entire term of the loan, even if market interest rates rise. 

Home Equity Rates Are on the Rise

Inflation remains high, but October’s numbers offered a glimmer of hope that it’s starting to slow. The Consumer Price Index was up 7.7% year-over-year in October, lower than expected.

That has implications for the Federal Reserve’s efforts to bring price growth down, but it also means a lot for consumers, especially those looking to borrow money.

“This is certainly welcome news. But it’s difficult to say that it’ll be convincing for the Fed policy makers quite yet,” says Jeffrey Roach, chief economist at LPL Financial, a national broker-dealer . “It’s certainly going in the right direction, deceleration in price growth, but it’s still growing.”

The Fed in November announced another hefty hike of 75 basis points to the federal funds rate, a short-term interest rate that determines what banks charge each other to borrow money. That affects the cost to borrow money across the economy, particularly home equity lines of credit or HELOCs.

“I still think it’ll be a popular product. But after another 1% increase in the Fed funds rate, I think you’ll start to see that interest slow down a bit,” says Scott Haymore, head of capital markets and mortgage pricing at TD Bank.

HELOCs often have variable interest rates that are directly tied to an index – the prime rate – that moves in lockstep with the federal funds rate. When the Fed hikes rates, it becomes more expensive to borrow with a HELOC. 

Home equity loans with fixed rates aren’t as directly affected, but those rates are set based on the lender’s cost of funds, which also rises as rates go up.

“Many economists expect rates to stabilize and, if we were to head into a recession, rates possibly could begin to slowly come down,” says Rob Cook, vice president of marketing, digital and analytics for Discover Home Loans. “Given all of the uncertainty, though, homeowners should generally expect rates to stay elevated in the near to mid-term.”

Best Home Equity Loan Lenders and Rates of November 2022

Here are the best home equity loan rates of December 2022:

LENDERAPRLOAN AMOUNT RANGELOAN TERMSMAX LTV
U.S. BankStarting from 7.45%$15,000 – $750,000 (up to $1 million for properties in California)Up to 30 years80%
TD Bank6.49% to 9.76%$10,000 and up5, 10, 15, 20, or 30 years89.99%
Connexus Credit UnionStarting from 7.24%$5,000 – $200,0005 to 15 years90%
KeyBankStarting from 10.79% (0.25% KeyBank client discount not included)$25,000 and up5 to 30 years80% for standard home equity loans, 90% for high-value home equity loans
Spring EQFill out application for personalized rates$5,000 – $500,0005 to 30 years90%
Third Federal Savings & LoanStarting from 6.29%$10,000 – $200,0005 to 30 years80%
Frost BankStarting from 5.24% (0.25% AutoPay discount not included)$2,000 and up7 to 20 years for second lien, 10 to 20 years for first lien80%
Regions Bank6.375% to 13.00% (0.25% AutoPay discount not included)$10,000 – $250,0007,10, 15, or 20 years80%
Discover (honorable mention)6.74% – 12.99%$35,000 – $300,00010, 15, 20 and 30 yearsNot specified
BMO Harris Bank (honorable mention)Starting from 6.74% (0.5% AutoPay discount not included)$5,000 and up5 to 20 years89.99%

The APRs shown above are accurate as of Dec. 1, 2022. They are the only APRs openly available among the lenders we assessed. The NextAdvisor editorial team updates this information regularly, although it is possible APRs have changed since they were last updated.

As with any type of lending, your interest rate will depend on multiple factors, including your credit score, income, desired loan amount and term, how much equity you have in your home, and more. To know your exact rate from a particular lender, you’ll need to pre-qualify or submit an application with the lender.  

How Does a Home Equity Loan Work?

A home equity loan is a fixed-rate installment loan secured by your home. You’ll get a lump sum payment upfront and then repay the loan in equal monthly payments over a period of time. Because your house is used as collateral, the lender can seize it if you default. 

Home equity is the difference between the value of your home and what you owe on the mortgage. A home equity loan lets you borrow against that equity. The more equity you have, the more you can borrow. Lenders typically allow a maximum loan-to-value ratio of 80% to 85%. This means that the combined value of your home equity loan and primary mortgage balance cannot exceed 80% to 85% of your home’s appraised value. 

Home equity loans usually have anywhere from five- to 30-year terms and come with a fixed interest rate, meaning whatever rate you lock in at the beginning of the loan term will remain throughout its duration. That’s a positive in an environment where interest rates continue to rise.

Tax deductions and limits

The interest you pay on a home equity loan is tax deductible if you use the money on home renovations that improve the value of your residence. You can deduct the interest on up to $750,000 of home loans if you’re married and filing jointly or a single taxpayer. If you’re married and filing separately, you can deduct the interest you pay on up to $375,000 of home loans.

These limits cover the amount of your combined home loans, including your primary mortgage and home equity loan.

You can’t deduct home equity loan interest if you use the money for other purposes, such as paying for college tuition or consolidating debt.

What to Use A Home Equity Loan For

A home equity loan is a good choice if you need a large sum of cash all at once. You can use that cash for anything you’d like. However, some uses of the funds from home equity loans make more sense than others: 

Experts don’t recommend using a home equity loan for discretionary expenses like a vacation or wedding. Instead, try saving up money in advance for these expenses so you can pay for them in cash without taking on unnecessary debt. 

Pros and Cons of Home Equity Loans

Pros

  • One lump sum payment of total loan amount up front

  • Fixed interest rate, meaning you won’t have to worry about your rate rising over the repayment period

  • Typically lower interest rate than credit cards or personal loans

  • Little to no restrictions on what you can use the money for

Cons

  • Your home is used as collateral, meaning it can be taken from you if you default on the loan

  • If you’re still paying off your mortgage, this loan payment will be on top of that

  • Home equity loans can come with closing costs and other fees

  • May be hard to qualify for if you don’t have enough home equity

How to Apply for a Home Equity Loan

Applying for a home equity loan is similar to applying for any mortgage loan. You’ll need both a solid credit score and proof of enough income to repay your loan. 

Here are the steps to apply for a home equity loan: 

  1. Evaluate your current financial situation: Can you afford another monthly payment? You won’t know unless you create a budget that lists your monthly income and expenses. Once you create a budget, you’ll know how much you can afford to spend on another monthly loan payment. Make sure you’re clear on how you plan to use the funds and whether your financing needs are worth taking on debt for. 
  2. Research lenders: You might want to work with the lender who originated your primary mortgage, but you don’t have to. Do your research to look for home equity loan lenders who offer the lowest interest rates, or those who can offer the loan terms and loan amounts that best fit your needs. Compare rates and fees from multiple lenders to find the best deal.
  3. Gather your paperwork: Your lender will want to verify your income to make sure you can afford another monthly payment. To do this, they’ll want to see copies of your most recent pay stubs, tax returns, W-2 statements, and bank account statements. 
  4. Apply with a lender: Most lenders will require you to complete an online loan application to start the home equity lending process. You’ll also need to send your lender copies of the documents they’ll need to verify your income. Depending on your lender’s requirements, you may also need to schedule a home appraisal to determine your home’s value. 
  5. Wait out the underwriting process: After your lender receives your documents and application, they’ll evaluate your financial situation to determine whether you can afford the added monthly payments. This is known as the underwriting process. Your lender will also perform a hard credit inquiry during this step to check your credit score. Most lenders consider a FICO credit score above 700 to be “good,” according to the credit bureau Experian. Lenders will also look at your debt-to-income ratio, which is calculated by dividing all your monthly debt obligations by your gross monthly income. Most lenders will want your debt-to-income ratio to be less than 43%. 
  6. If your application is approved, review the final terms: If your mortgage lender approves your application for a home equity loan, they’ll send you a closing disclosure. This form lists your loan’s final costs and interest rate and spells out how much you must pay each month and for how many months. Your lender must send this to you at least three business days before your scheduled closing. When you first apply for a home equity loan, your lender will send you a loan estimate. This form lists your estimated closing costs and loan fees. Make sure the numbers on your closing disclosure and loan estimates are similar. Fees can change between your estimate and your closing disclosure, but they shouldn’t rise significantly.
  7. Close on your loan and wait for your cash: If you’re satisfied with your loan fees and closing costs, you can move ahead to the official closing. At that time, your lender grants final approval and disburses your lump-sum payment. You can often complete the closing online, though you might have to meet in person at your lender’s office or a title company’s office. Once you sign the right paperwork, your lender will give you a check for your loan amount. You’ll then start making regular monthly payments with interest to pay back what you’ve borrowed. 

Home Equity Loan Monthly Payments 

How much you pay each month for a home equity loan depends on three main factors: how much you borrowed, your loan’s interest rate, and how many years you have to pay back your loan. 

If you take out a 10-year home equity loan for $10,000 with an interest rate of 6%, you’d pay $111 a month. You’d also pay a total of $3,322 in interest during the life of your loan. 

If you raise the loan amount to $50,000, you’d pay $555 a month and $16,612 in total interest. And if you borrow $100,000, you’d pay $1,110 a month and $33,225 in total interest during your 10-year repayment period. 

10-year loan at 6% interest

Loan amountMonthly paymentTotal interest paid
$10,000$111$3,322
$50,000$555$16,612
$100,000$1,110$33,225

But what if you take out a longer-term home equity loan for something like 15 years at 6% interest? If you borrow $10,000 for this longer term, you’d pay $84 a month and $5,189 in total interest for the life of your loan. If you borrow $50,000, you’d pay $422 a month and a total interest amount of $25,947. Finally, if you borrow $100,000, you’ll pay $844 a month and $51,894 in total interest. 

15-year loan at 6% interest

Loan amountMonthly paymentTotal interest paid
$10,000$84$5,189
$50,000$422$25,947
$100,000$844$51,894

Taking out a shorter-term home equity loan means you’ll have a higher monthly payment. But you’ll also pay less in interest over the life of your loan. The opposite is true for longer-term loans: You’ll pay less each month but more in interest overall.

Your interest rate will also affect your monthly payment and the total cost of the loan. Given the same loan amount and loan term, a higher interest rate will result in a higher monthly payment and more money paid in interest over the life of the loan. That’s why it’s important to shop around with multiple lenders to find the lowest interest rate. 

You can use NextAdvisor’s loan calculator to see how much it would cost to borrow money with a home equity loan at different interest rates and terms. 

Home Equity Loan vs. HELOC

Another common type of home equity financing is a home equity line of credit (HELOC). HELOCs are not traditional loans where you get paid a lump sum upfront. Instead, they work like a revolving line of credit, similar to a credit card secured by your home. You only have to pay for what you spend, plus interest. 

Another key difference is that HELOCs typically come with a variable APR, which means your interest rate can rise and fall depending on the prime rate. That differs from home equity loans, which generally have a fixed interest rate that never changes. 

A home equity loan is usually a better choice if you need to borrow money for one big purchase, such as a kitchen remodel, or to pay off high-interest-rate credit card debt. A HELOC makes more sense when you want access to a steady line of credit to cover a range of projects and expenses.

HOME EQUITY LOANHELOC
Fixed-term loanRevolving credit line
Fixed APRVariable APR (usually)
Pay full loan amountPay only what you spend
Home used as collateralHome used as collateral
Funds for as long as they lastSet draw period
Lump sum at the onset of loanOngoing cash
Interest can be deducted for home projectsInterest can be deducted for home projects

Alternatives to a Home Equity Loan

Although home equity loans are one of the best ways for homeowners to finance large expenses, they’re not the only option. Popular alternatives to a home equity loan include: 

Cash-out mortgage refinancing 

A cash-out refinance is when you pay off your existing home loan by getting a new one that’s larger than what you currently owe. You then get a check for the difference and can use that money on anything you’d like.

Once you complete a cash-out refinance, you’re left with a new mortgage loan with new rates and terms. You’ll pay this loan back in monthly installments, with interest, just like your previous mortgage.

How much cash you can pull out of your home with a cash-out refinance depends on how much home equity you have. Lenders will typically require you to keep at least 20% equity in your home. For example, if your house is worth $250,000 and you owe $150,000 on your mortgage, you have $100,000 worth of equity. You can refinance to a new mortgage worth up to $200,000 while still keeping 20% ($50,000) equity in your home. After you use the funds to pay off your existing mortgage, you’ll be left with $50,000 in cash (minus any closing costs). 

Cash-out refinancing makes sense when you can get a lower refinance rate than your existing mortgage rate. However, that may be difficult for many homeowners in this current rate environment. When mortgage rates are high, home equity loans — which don’t alter the rate on your primary mortgage — tend to be a cheaper option than cash-out refinancing.

Personal loans

A personal loan lets you borrow a fixed sum of money at a fixed interest rate, to be repaid over a fixed period of time. 

The terms of these loans vary but generally run from 12 months to seven years, though it’s possible to find personal loans with longer terms. Your interest rate will vary depending on your credit score, loan term, and how much you borrow. Generally, though, personal loans come with higher interest rates than home equity loans because the debt is unsecured and thus riskier for the lender. 

On the plus side? Personal loans typically do not require collateral. If you stop making your payments, your lender will not be able to foreclose on your home. However, you could still face other serious consequences, so try to always make your payments on time and in full, if possible. 

Home equity line of credit (HELOC)

Home equity lines of credit, better known as HELOCs, work a bit like a credit card where your home acts as collateral and your home equity determines the credit limit. During the draw period, you can keep borrowing money up to your HELOC’s credit limit. Then, when the draw period ends and the repayment period begins, you’ll pay back what you borrowed. 

You may get approved for a large credit line, but you’ll only need to pay back what you use, plus interest. If you qualify for a HELOC of $50,000 and only use $20,000 of that amount to pay for a bathroom remodel, you’ll pay back only $20,000, plus interest. If you then borrow an additional $10,000 to upgrade your kitchen, you’ll pay that back with interest, too.  

HELOCs are a good choice when you’re not sure exactly how much money you need to finance or if you just want a line of credit on hand to tap into as needed

The drawback of HELOCs is that they usually come with variable interest rates. This means that your interest rate and monthly payment could rise depending on the prime rate.

Frequently Asked Questions (FAQ)

What is home equity?

Home equity is the difference between what you owe on your mortgage and what your home is currently worth. In other words, it is your stake in the property, or what you could make if you sold before paying down the mortgage in full.

How do you calculate your home equity?

Calculating your home equity is a simple equation, found by subtracting how much you owe on your mortgage from your home’s estimated market value. For example, if you own a home worth $350,000 and owe $200,000 on your mortgage, your home equity is worth $150,000.

Where can I get a home equity loan?

You can get a home equity loan from a number of different lenders. Check for the best rates from local banks and credit unions, national banks, and online lenders.

Are home equity loan rates higher than mortgage rates?

Because most home equity loans are second lien products — meaning that if you default, your home equity loan lender is second in line to foreclose on your home, after your primary mortgage lender — they typically have slightly higher interest rates than primary mortgages. 

Despite the higher rate, a home equity loan can still be cheaper than a cash-out refinance in some circumstances because the interest rate only applies to the amount you’re borrowing, not your entire mortgage balance. 

How do I get the lowest home equity loan rate?

The lowest home equity loan rates are typically only available to the most creditworthy borrowers, so take what steps you can to raise your credit score before you apply for a home equity loan. Beyond that, the most important thing is to shop around and compare offers from multiple lenders in order to find the best rate. Be sure to also factor in closing costs and fees so you can accurately compare the total cost of borrowing.

What is the three-day cancellation rule?

Under federal law, you have three business days from the day you sign your loan agreement on a home equity loan to reconsider and cancel your loan without penalty, if you so wish. You can cancel your loan for any reason, but the three-day cancellation rule only applies to home equity loans and HELOCs secured by your primary residence — not a vacation home or rental property.

Mortgage refinances are also subject to the same three-day cancellation rule, also known as the right of rescission.