Home Equity Loans: Fixed-Rate Funding for Defined Projects
A lump-sum second mortgage at a fixed rate — best when you know exactly what you'll spend and want predictable payments.
- Typical APR
- 8.5–10.5%
- Term
- 5–30 years
- Max LTV
- 80–85%
- Closing costs
- 2–5% of loan
- Min credit
- 620–680 FICO
- Funding time
- 2–6 weeks
Fixed
Often waived for $0 lender credit
How it works
You get a lump sum at closing and repay it with fixed monthly payments over a fixed term. The rate is locked at closing and your payment never changes. It's a second lien behind your existing mortgage.
Home equity loan vs HELOC
- Home equity loan — fixed rate, lump sum, predictable. Best when you know the total cost.
- HELOC — variable rate, revolving credit, flexible. Best for staged or unknown-scope projects.
When to choose a home equity loan
- You have a single defined project (roof, kitchen, debt consolidation)
- You want a predictable monthly payment
- You don't want to worry about rate increases
- You prefer set payoff date over flexible draws
Compare options
Three ways to borrow against your home
| Option | Typical cost | Lifespan | Best for |
|---|---|---|---|
| Home equity loan | 8.5–10.5% fixed | 5–30 yr term | Defined project, predictable payment |
| HELOC | 8–10% variable | 10–30 yrs total | Staged or open-ended project |
| Cash-out refinance | Replaces 1st mortgage | 15–30 yrs | Today's rate is below your current rate |
Pros & cons
Pros
- ✓Fixed rate — no payment surprises
- ✓Lump sum at closing
- ✓Often longer terms than HELOCs
- ✓May be tax-deductible for home improvements
Cons
- ✕Closing costs higher than most HELOCs
- ✕Interest on the full balance from day one
- ✕Home is collateral
- ✕Less flexible than a HELOC
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Frequently asked questions
What's the difference between home equity loan and HELOC?
A home equity loan gives you a lump sum at a fixed rate; a HELOC is a revolving line of credit at a variable rate. Choose a loan for predictable, defined projects; a HELOC for flexible, ongoing needs.
How much can I borrow with a home equity loan?
Most lenders allow combined loan-to-value (1st mortgage + home equity loan) up to 80–85% of the home's appraised value.
Is home equity loan interest tax deductible?
Yes, when proceeds are used to buy, build, or substantially improve the home that secures the loan (IRS Pub 936). Funds used for other purposes generally don't qualify.
How long does it take to get a home equity loan?
Typical closings run 2–6 weeks — credit pull, appraisal (or AVM), underwriting, and signing.
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