Home Equity Loan vs HELOC
Pick the Right One in Five Questions

A home equity loan gives you a fixed lump sum at a fixed interest rate with fixed monthly payments. A HELOC is a revolving credit line with a variable rate; you draw what you need during a 5-10 year draw period, making interest-only minimum payments, then repay principal and interest over a 10-20 year repayment period. The core difference: certainty and predictability (HEL) versus flexibility with rate risk (HELOC).

For most borrowers with a known lump-sum need in 2026, the home equity loan is typically smarter. Fixed rates around 7.37% eliminate exposure to prime rate moves (currently 6.75%). If you have a phased project where you will draw funds over 2+ years, or want the option to re-borrow during a draw period, a HELOC can make sense. The 5-question flowchart at the top of this page routes you to the right answer in 30 seconds.

The national average for a 15-year home equity loan is 7.37% as of April 2026 (Curinos/Bankrate weekly survey). Rates range from about 6.50% (10-year, excellent credit) to 9.00%+ (20-year, fair credit). The prime rate is 6.75%, lowered from 7.00% on December 10, 2025. HELOC rates average 7.07-7.24% (variable, prime + margin). See the full rate breakdown on our rates page.

At the April 2026 average rate of 7.37%: over 15 years, approximately $459/month. Over 10 years, approximately $590/month. Over 20 years, approximately $393/month. The payment is fixed for the life of the loan. Compare that to a $50,000 HELOC at 8.50% during the draw period: interest-only minimum of $354/month, jumping to approximately $492/month when the repayment period begins.

Only if the funds are used to buy, build, or substantially improve the home that secures the loan (IRS Publication 936). The TCJA limits were made permanent by the One Big Beautiful Bill Act: total qualified residence debt capped at $750,000 ($375,000 if married filing separately), and you must itemise deductions. The 2026 standard deduction is $31,600 for MFJ and $15,800 for single filers, a high bar that roughly 75% of filers don't clear. Debt consolidation, tuition, and medical bills do not qualify.

Yes. Under Regulation Z (12 CFR 1026.40(f)), lenders can freeze, reduce, or suspend a HELOC if your home value declines significantly, your financial circumstances materially change, or you breach a material loan obligation. This happened at scale in 2008-2009 when Chase, Bank of America, Wells Fargo, and others froze tens of thousands of lines as home values fell. The risk is precisely that the line may disappear at the moment you need it most.

Payment shock occurs when the draw period ends and interest-only payments convert to full principal-and-interest payments. On a $50,000 HELOC at 8.50%, you go from $354/month (interest-only) to $492/month (15-year repayment) -- a 39% jump. If rates rise to 10% by the time repayment starts, the payment climbs to $537/month. Our dedicated risks page models this across multiple rate scenarios.

Most lenders allow you to borrow up to 80-85% of your home value minus your outstanding mortgage balance (CLTV). Example: $500,000 home, $300,000 mortgage balance, 85% CLTV cap. Maximum borrow: $500,000 x 85% - $300,000 = $125,000. Some lenders (SoFi) go to 90% CLTV. Your credit score, DTI (typically capped at 43%), and the lender's specific underwriting also affect the maximum.

Most lenders require a minimum credit score of 620, with the best rates reserved for 740+. Discover accepts scores from 620, Figure and Aven from 640, and most major banks prefer 680 or higher. A score of 740+ qualifies you for a HELOC margin of prime + 0 to 1%, while a 620-679 score may mean prime + 2 to 4%. DTI and CLTV are equally important to the lender.

They are the same thing. A home equity loan is a second mortgage: it is a second lien on your property, behind your primary (first) mortgage. The terms are often used interchangeably. A HELOC is also technically a second mortgage, though structured as a revolving line rather than a fixed term loan.