Is a HELOC a good idea?

A HELOC can be a good idea if used for home improvement projects that increase the value of your home. Because a HELOC lets you take out what you need when you need it, it’s best for ongoing projects or expenses. A HELOC is not a good idea if you don't have a steady income or a financial plan to pay off the loan. Since you use your home as collateral, if you fail to make the payments in full and on time, you risk losing your home.

Are HELOC rates fixed?

Like credit cards, HELOCs typically have variable interest rates, meaning the rate you initially receive may rise or fall during your draw and repayment periods. However, some lenders have begun offering options to convert all or part of your variable-rate HELOC into a fixed-rate HELOC, sometimes for an additional fee.

Is a HELOC tax deductible?

Interest paid on a HELOC is tax deductible as long as it’s used to “buy, build or substantially improve the taxpayer’s home that secures the loan,” according to the IRS. Interest is capped at $750,000 on home loans (combined mortgage and HELOC or home equity loan). So if you had a $600,000 mortgage and a $300,000 HELOC for home improvements on a house worth $1.2 million, you could only deduct the interest on the first $750,000 of the $900,000 you borrowed. If you are using a HELOC for any purpose other than home improvement (such as starting a business or consolidating high-interest debt), you cannot deduct interest under the tax law. A good way to do this is by taking advantage of prequalification forms, which let you see your potential rates and eligibility with a lender without impacting your credit score.

Which is better: A HELOC or a home equity loan?

Choosing between a HELOC and a home equity loan comes down to your financial situation, needs and priorities. A HELOC usually has a longer repayment period and allows you to take only the money you need, when you need it, so it's best for people who have ongoing expenses or those who prefer to pay back debt at their own pace. A home equity loan, on the other hand, offers more predictability in terms of monthly payments, since you'll receive a large sum of money upfront and pay it back in monthly installments with a fixed interest rate. Home equity loans are usually best for people who need a lump sum right away and want a predictable monthly payment.

Will a HELOC hurt my credit score?

Due to the fact that HELOCs are revolving lines of credit, they can impact, and even hurt, your credit. When you apply, typically the lender will run a hard inquiry to assess your creditworthiness, and that can have a small impact on your credit score. While a hard inquiry may cause your credit score to drop a few points, you should be able to recover those points if you make timely payments on your HELOC balance. That said, a HELOC will more significantly hurt your credit score if you fail to make on-time payments or if you miss payments altogether. You also run the risk of losing your home, since a HELOC uses it as collateral. Minimum requirements generally include a credit score of 620 or higher, a maximum loan-to-value ratio of 80 percent or 85 percent and a documented source of income.

Are HELOC interest rates higher than home equity or personal loans?

HELOC interest rates tend to be lower than interest rates for home equity loans and personal loans. However, HELOC rates also tend to be variable, meaning that rates could increase depending on decisions from the Federal Reserve. As rates continue to rise, a HELOC with a variable interest rate might be a riskier proposition for some.

Can you pay off a HELOC early?

Depending on your lender, you can pay off a HELOC early without being penalized. If you’d like to prepay, try to do it within the interest-only period so you avoid paying more during the repayment time frame. However, some lenders do charge prepayment penalties that could cost up to a few hundred dollars.

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Best home equity line of credit (HELOC) rates for November 2023

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What are today's average HELOC rates?

LOAN TYPE	AVERAGE RATE	AVERAGE RATE RANGE
HELOC	10.02%	9.31% – 12.25%

To conduct the National Average survey, Bankrate obtains rate information from the 10 largest banks and thrifts in 10 large U.S. markets. The rates shown above are calculated using a loan or line amount of $30,000, with a FICO score of 700 and a combined loan-to-value ratio of 80 percent.

Note: The above APRs are current as of November 21, 2023. The exact APR you might qualify for depends on your credit score and other factors, such as whether you're an existing customer or enroll in auto-payments.

National HELOC interest rate trends

HELOC rates hover at 10 percent

The average rate on a home equity line of credit (HELOC) was 10.02 percent as of Nov. 21, according to Bankrate’s survey of large lenders. This is down from 10.04 the previous week, but up nearly a full percentage point from 9.09 percent three weeks ago.

While the average rate jumped, there are still lenders advertising lower rates.

HELOCs come with variable interest rates, which change based on the prime rate, in turn tied to Federal Reserve policy. The central bank on Nov. 1 decided not to raise its benchmark federal funds rate. The impact of this move will unfold between now and when the Fed next meets in December.

HELOC rates can also change because one or more home equity lenders markets an especially generous rate. That’s one reason why it often pays to search around for HELOC offers, at least for a lower introductory rate.

Even at over 10 percent, HELOCs are still more attractively priced compared to unsecured personal loans, which averaged a rate of 11.53 percent this week. If you’re looking to finance a renovation and have equity to tap, a line of credit could be less expensive than a home improvement loan. It’d also save you from a cash-out refinance, which could mean giving up a low rate on your mortgage in exchange for a new one.

Many homeowners leverage equity to make improvements. Of homeowners undertaking a renovation, 38 percent plan to finance the project with a HELOC or home equity loan, according to a new survey by TD Bank.

A line of credit isn’t the only way to leverage your home’s equity. Another option: home equity loans, or second mortgages, which come with fixed interest rates. As of Nov. 21, the 10-year home equity loan rate averaged 9.08 percent and the 15-year home equity loan rate averaged 9.12 percent, according to Bankrate’s survey.

How to get the best HELOC rate

When shopping for a HELOC, look for a competitive interest rate, repayment terms that meet your needs and minimal fees. Loan details presented here are current as of the publication date. Check the lenders’ websites for more current information. The top lenders listed below are selected based on factors such as APR, loan amounts, fees, credit requirements and broad availability.

Before you start shopping for a HELOC, make sure you meet lenders’ requirements. Then, take some time to improve your credit score. If you carry a big credit card balance, pay it down. If your auto loan note is almost done, you might pay it off a month or two early. You might also make a few additional mortgage payments to increase your home equity.

Once everything is in order, shop around. To find the best HELOC rate, compare multiple lenders — a rule of thumb is to get quotes from at least three. Remember, the rate is important, but it’s not the only factor you should consider. Competing HELOC rates are likely to be close, so be sure to also scrutinize fees and terms to get a sense of the APR, and make sure you’re not comparing apples to oranges.

Best home equity line of credit (HELOC) rates in November 2023

LOAN TYPE	LOAN AMOUNT	LOAN TERM	CURRENT APR	BEST FOR
Bethpage Federal Credit Union	Up to $500,000	10-year draw, 20-year repay	6.99%	Fixed-rate options
Bank of America	$15,000–$1 million	10-year draw, 20-year repay	Starting at 9.90%	Low fees
Flagstar Bank	$10,000–$1,000,000	10-year draw, 20-year repay	Starting at 8.49%	Good credit
Figure	$15,000–$400,000	5–30 years	Not specified	Fast funding
Citizens	Starting at $5,000	10-year draw, 15-year repay	Not specified	Low loan amounts
Lower	$15,000–$350,000	10-year draw, unspecified repay	Not specified	Quick approval
PenFed Credit Union	$25,000–$500,000	10-year draw, 20-year repay	Starting at 8.625%	Flexible membership requirements
PNC	$10,000–$1 million	5-30 years (except in TN, where terms are 5-20 years)	Not specified	Borrowing options
TD Bank	Starting at $25,000	Not specified	Not specified	In-person service
Connexus Credit Union	Starting at $5,000	15 years	5.99%	Fast Approvals
Guaranteed Rate	$20,000-$400,000	Up to 30 years	9.40%	Fixed-rate HELOC
Spring EQ	$25,000-$500,000	5-30 years	Not Specified	Online Lender

Note: The above APRs are current as of November 1, 2023. The exact APR you might qualify for depends on your credit score and other factors, such as whether you're an existing customer or enroll in auto-payments.

Bethpage Federal Credit Union: Best home equity line of credit with a fixed-rate option

4.2

Bankrate Score

Overview

Bethpage is a credit union that serves over 400,000 members. The credit union offers mortgage loans, refinance loans and HELOCs. Its HELOCs have zero fees.

Lender: Bethpage Federal Credit Union
Interest Rates: 6.99% APR
Approval Time: Not specified
Max LTV Ratio: Not specified
Minimum Credit Score: Not specified
Available Term Lengths: 10-year draw period with a 20-year repayment period
Line of Credit Amount: Up to $1,000,000
Fees: If you close your HELOC within 36 months, you'll need to repay the closing costs you would've paid. Hazard insurance and flood insurance may be required.

Bethpage offers the unique option to convert some or all of a variable-rate HELOC to a fixed-rate loan without a fee. With this option, you can choose between five-, 10- and 20- year repayment terms.
Unlike many competitors, Bethpage does not charge closing costs or annual fees, and its HELOCs have incredibly low introductory rates for the first year.
In order to sign up for a Bethpage HELOC, you must become a member of the credit union by opening a minimum $5 share savings account. Additionally, Bethpage HELOCs are not available to borrowers who live in Texas.
Available in all U.S. states except Texas. To start the process, fill out a brief application discussing your current home value, purpose of your new loan and personal information. You can also call a lending agent. You must become a member of the credit union (by opening a $5 savings account).

Bank of America: Best home equity line of credit for low fees

4.2

Bankrate Score

Overview

Bank of America offers HELOCs in all 50 states and Washington, D.C., and nixes a lot of fees that other banks charge. You can also shave 0.25 percent off your rate when you set up automatic payments from a Bank of America checking or savings account, up to 0.75 percent off for making an initial withdrawal and up to 0.375 percent off for being a Preferred Rewards client.

Lender: Bank of America
Interest Rates: Starting at 9.90% APR
Approval time: 5-7 weeks
Max LTV Ratio: 85%
Minimum Credit Score: Unavailable
Available Term Lengths: 10-year draw period with a 20-year repayment period
Line of Credit Amount: Starting at $15,000 to $1,000,000
Fees: Early closure fee of $450, plus taxes and fees, apply to accounts closed within 36 months

There are no application fees, no annual fees and no closing costs on lines of up to $1 million.
If you qualify for the entire 1.375 percent discount on your interest rate, you’ll save a lot over the life of your loan. Rates vary depending on creditworthiness, loan amount and other factors, APR varies by state. As with some other lenders, you can convert some or all of your balance to a fixed-rate loan.
The best rate discounts are reserved for Preferred Rewards members and those who make large draws from their HELOCs.
Available in all 50 U.S. states and D.C. To apply, complete an online 15-minute application, call, or meet with an advisor at a nearby financial center.

Flagstar Bank: Best home equity line of credit for good credit

Bankrate Score

Overview

Flagstar Bank offers HELOCs that feature flexible withdrawal methods and affordable rates for those who can qualify. If you’re looking for a HELOC that offers attractive terms and you have a solid credit rating, you should check it out.

Lender: Flagstar Bank
Interest Rates: Starting at 8.49% APR
Approval Time: 3-5 days
Max LTV Ratio: 89.99%
Minimum Credit Score: 680
Available Term Lengths: 10-year draw period with a 20-year repayment period
Line of Credit Amount: $10,000 to $1,000,000
Fees: The annual fee is $75 (waived the first year), and borrowers may have to pay back closing fees if the account is closed within 36 months. Some loans require title insurance, government taxes and fees at closing.

There are no application fees, no annual fees and no closing costs on lines of up to $1 million.
Flagstar has flexible loan amounts that range from as little as $10,000 to as much as $500,000.
There’s an annual fee of $75, though it’s waived in the first year. And while most banks let you convert some or all of your balance to a fixed-rate loan, Flagstar’s APR remains variable for the life of the loan. That means you may pay more in interest. Flagstar's loan offerings also vary by ZIP code; the details here are presented for the 49546 ZIP code.
Available in all states except Texas. To apply, you can visit a local branch, call the bank or complete a form online.

Figure: Best home equity line of credit for fast funding

4.7

Bankrate Score

Overview

Figure is an online lender that offers HELOCs in 41 states and Washington, D.C. Its rates include an origination fee of up to 4.99 percent and discounts for enrolling in autopay and joining one of it partner credit unions. Its HELOC works a bit like a home equity loan in the beginning: You get the full loan amount (minus the origination fee) with a fixed rate. As you pay off the line of credit, you can borrow funds again up to the limit. These draws will get a different interest rate.

Lender: Figure Lending LLC
Interest Rates: Not specified
Approval Time: As little as 5 minutes
Max LTV Ratio: Not specified
Minimum Credit Score: Not specified
Available Term Lengths: 5 to 30 years
Line of Credit Amount: $15,000 to $400,000
Fees: Pay an origination fee of up to 4.99% of your initial draw

Figure promises an easy online application process with approval in five minutes and funding in as few as five business days. Figure could be a good option for borrowers who need fast cash.
There’s a fixed interest rate, which means the payments won’t change over the life of the loan unless you make additional draws.
While some lenders offer a wide range of loan amounts, Figure caps its loans at $400,000 — though you may qualify for less, depending on your loan-to-value ratio and credit score. That might not be enough for some borrowers. There’s also an origination fee of as much as 4.99 percent.
Figure Bank HELOCs are available in AK, AL, AR, AZ, CA, CO, CT, DC, FL, GA, IA, ID, IL, IN, KS, LA, MA, ME, MI, MN, MO, MS, MT, NC, ND, NE, NH, NJ, NM, NV, OH, OK, OR, PA, RI, SC, SD, TN, UT, VA, VT, WA, WI and WY. To get started with Figure Bank, fill out a brief online application. You can be approved in as few as five minutes. Online video notary and support services are available.

Citizens: Best home equity line of credit for low amounts

4.6

Bankrate Score

Overview

Established in 1828, Citizens now has 1,000 branches spread across 11 states in the New England, Mid-Atlantic and Midwest regions. If you’re looking to borrow a small amount and you prefer banking in person, Citizens is a solid choice.

Lender: Citizens
Interest Rates: Not specified
Approval Time: As little as 2-3 minutes
Max LTV Ratio: Not specified
Minimum Credit Score: Not specified
Available Term Lengths: 10-year draw period with 15-year repayment period
Line of Credit Amount: Minimum $5,000, but lines over $200,000 are available and have the lowest rates
Fees: There’s a $50 annual fee during the draw period (waived in the first year) and a $350 prepayment fee if you close your HELOC within 36 months.

Citizens’ lines of credit begin at $5,000 with its GoalBuilder HELOC and $17,500 with its standard HELOC.
With Citizens, you pay no setup or appraisal fees. Rates are also low.
For the standard HELOC, there’s a $350 prepayment penalty if you pay off your HELOC and close it within 36 months, along with a $50 annual fee during the draw period (waived in the first year). It also may take up to 45 days to get your funding, which could be a deal breaker for some. Additionally, Citizens' offerings may vary by ZIP code; loan details presented here are based on the 10019 ZIP code, but your available terms and interest rates may vary.
Citizens Bank’s HELOC, Citizens FastLine, is available in AL, AR, CT, DC, DE, FL, GA, IA, IL, IN, KY, MA, MD, ME, MI, MN, NC, NE, NH, NJ, NY, OH, OK, PA, RI, SC, SD, TN, VA and VT. You can apply online and receive an offer in 2-3 minutes, close in as few as 7 days and receive the funds in as little as 2 weeks.

Lower: Best home equity line of credit for quick approval

3.7

Bankrate Score

Overview

Lower, a fintech company that was founded in 2018, analyzes data to recommend the best loan for each borrower's financial situation. Lower offers mortgages, refinance loans, home equity loans and HELOCs.

Lender: Lower
Interest Rates: Not Specified
Approval Time: Not specified
Max LTV Ratio: 95%
Minimum Credit Score: Not specified
Available Term Lengths: 10-year draw period, unspecified repayment period
Line of Credit Amount: $15,000 to $350,000
Fees: There's an origination fee of 1% on each HELOC transaction.

Lower gets its name from offering "lower" rates and promises a quick approval and closing process. The application process is completely online, and the application is streamlined and full of easy-to-understand language.
Lower lets you borrow up to 95 percent of your home's value, while most other lenders cap LTV at 80 or 85 percent. Additionally, Lower does not charge an annual fee.
Lower charges a 1 percent origination fee on all HELOC transactions, so you may want to limit your spending. Lower also has a relatively low line of credit limit at $350,000.
Available in all states and D.C. except Alaska, Hawaii, New York and Rhode Island. To get started, fill out a brief online application.

PenFed Credit Union: Best home equity line of credit with flexible membership requirements

3.9

Bankrate Score

Overview

Pentagon Federal Credit Union, or PenFed, serves 2 million members in all 50 states, Washington, D.C., and military bases in Guam, Puerto Rico and Okinawa. This credit union offers competitive rates on its HELOCs, along with other financial services, including credit cards, checking accounts, savings accounts, mortgages and auto loans.

Lender: PenFed Credit Union
Interest Rates: Starting at 8.625% APR
Approval Time: Not specified
Max LTV Ratio: 85%
Minimum Credit Score: 680
Available Term Lengths: 10-year draw period with a 20-year repayment period
Line of Credit Amount: $25,000 to $500,000
Fees: $99 annual fee, waived if $99 in interest was paid during the preceding 12-month period; $30 returned loan payment, check or ACH fee; $20 lien processing fee; late fee of 5% of past due amount, with $20 minimum.

While PenFed has a history of serving service members, you may also qualify for membership by being a member of other select organizations.
PenFed's interest rates start at 8.00 percent, which is low compared to the starting rates of some other lenders. You’ll also get a break on certain fees, as PenFed pays most of the closing costs associated with its HELOCs.
While this credit union has flexible membership requirements, you still have to join to get a HELOC. This adds a step to the process and could be a deal breaker for some. Additionally, if you close your account within 36 months, you’ll be on the hook for the closing costs PenFed paid on your behalf. There’s also a $99 annual fee (waived if you paid $99 in interest in the previous year), and you may have to pay taxes in certain states and appraisal fees if an appraisal is required.
Available in all 50 states, D.C. and three U.S. military bases. You can start the application process online or over the phone. A PenFed HELOC Express can close in as little as 15 days.

PNC: Best home equity line of credit for flexible borrowing options

Bankrate Score

Overview

PNC offers HELOCs, mortgage refinancing products and mortgage products. Its products and services vary by location, so you'll need to input your ZIP code on the website to see the rates and terms available to you.

Lender: PNC
Interest Rates: Not Specified
Approval Time: Not specified
Max LTV Ratio: 89.9%
Minimum Credit Score: Not specified
Available Term Lengths: 5-30 years (except in TN, where terms are 5-20 years)
Line of Credit Amount: Not Specified
Fees: PNC does not specify any typical fees on its website, but it does charge $100 every time you convert some of your HELOC into a fixed-rate option.
Additional Requirements: PNC does not offer details about additional requirements.

With PNC, you can switch back and forth between a fixed and variable rate for a portion of your HELOC throughout the draw period.
PNC's HELOC lets you borrow up to 84.9 percent of your home's value, and you can get a discount on your rate if you set up automatic payments from a PNC checking account.
PNC's website is not upfront about information like interest rates and term lengths unless you input details about your home, which could make it harder to compare broadly across lenders. Additionally, the fixed-rate option requires a $100 fee each time you lock or unlock a rate.
Property securing the HELOC must be located in a state where PNC offers home equity products. The Choice HELOC is only offered in Alaska, Hawaii, Louisiana, Mississippi, Nevada and South Dakota through the PNC Asset Management Group. You can apply online.

TD Bank: Best home equity line of credit for in-person service

3.9

Bankrate Score

Overview

TD Bank is a great option if you live along the East Coast and prefer to bank in person. With that said, you can also bank by phone, online or via mobile app.

Lender: TD Bank
Interest Rates: Not specified
Approval Time: 2.5 days
Max LTV Ratio: 90%
Minimum Credit Score: 660
Available Term Lengths: Not specified
Line of Credit Amount: Starting at $25,000
Fees: There’s a $50 annual fee on loans over $50,000 and a $99 origination fee. The 2% termination fee (max $450) applies if you pay the line of credit off and close it within 24 months. You will also have to pay closing costs on lines over $500,000.

TD Bank customers can visit its more than 1,200 branches even on a few federal holidays and, in some locations, weekends.
TD Bank typically ranks high in customer satisfaction and offers low rates on its HELOCs. Borrowers may also get a 0.25 percent rate discount for having a TD Bank checking account.
TD Bank charges a few fees, though they’re mostly avoidable. The $50 annual fee applies to draws over $50,000, and if you pay off and close the account within 24 months, you may have to pay a 2 percent termination fee (max $450). There’s a $99 origination fee, and you may have to pay closing costs on certain accounts.
TD Bank serves Connecticut, Delaware, Florida, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Vermont, Virginia, and Washington, D.C. You can apply online or by phone.

Connexus Credit Union: Best home equity line of credit for fast approvals

4.1

Bankrate Score

Overview

Established in 1935, Connexus offers auto loans, personal loans, student loans, credit cards, banking products and more. Connexus’ HELOC rates are on par with those of other financial institutions on this list, and its approval speeds really shine.

Lender: Connexus
Interest Rates: 5.99% APR
Approval Time: within 30 days of applying
Max LTV Ratio: Not specified
Minimum Credit Score: 640
Available Term Lengths: 15-year draw period with a15-year repayment term
Line of Credit Amount: Starting at $5,000
Fees: Depending on loan terms and property location, closing costs can range from $175 to $2,000.

The credit union promises you’ll have your money within weeks, often delivering faster than the one-month maximum, members say.
You can apply for a home equity product entirely online or call a dedicated representative to get personalized service.
Connexus Credit Union doesn’t charge an annual fee for any of its home equity products. However, it does charge closing costs of $175 to $2,000 depending on the property location and loan terms. It also charges a returned loan payment fee of $15 ($9 by phone) and a force-placed insurance processing fee of $12.
Available in all states except Maryland, Texas, Hawaii, and Alaska. You need to join the credit union: You must be affiliated with a member community or company, or become part of the Connexus Association by making a one-time $5 donation.

Guaranteed Rate Best home equity line of credit with a fixed rate

4.6

Bankrate Score

Overview

Established in 2000 and headquartered in Chicago, Guaranteed Rate is one of the largest mortgage lenders in the U.S., with more than 850 branches. In 2022, the lender rolled out a fixed-rate home equity line of credit (HELOC) complementing its array of financing options.

Lender: Guaranteed Rate
Interest Rates: Starting at 9.40% APR
Approval Time: 5-10 minutes
Max LTV Ratio: 90% - 95%
Minimum Credit Score: 620
Available Term Lengths: Two-year to five-year draw period, up to 30-year repayment period
Line of Credit Amount: $20,000-$400,000 (Minimum of $25,001 in Alaska)
Fees: Guaranteed Rate charges a 1.5 percent origination fee for a HELOC. This is deducted from the line of credit, however; you don’t need to bring any money to closing.

Guaranteed Rate is one of the few major mortgage originators to offer fixed-rate HELOCs.
With a remote closing (if permitted in your state), you could receive your HELOC funds in as little as five days.
It’s a fixed-rate product, so no benefitting if interest rates decline in future.
Not available in certain states, including Texas and New York. You can apply for Guaranteed Rate’s HELOC through the lender’s digital application. Be prepared to verify your identity and provide information about your annual income and financial life. You can also pose questions to the lender’s virtual assistant or call 866-934-7283 or email customercare@rate.com.

Spring EQ: Best home equity line of credit for online servicing

4.3

Bankrate Score

Overview

Even if you have an average credit score, Spring EQ can help you tap into your home equity with flexible loan terms to fit most borrower profiles. An online lender, it scores strongly for the ease and efficiency of its all-digital experience.

Lender: Spring EQ
Interest Rates: Not disclosed
Approval Time: Same day, funding in average of 18 business days
Max LTV Ratio: 95%
Minimum Credit Score: 680
Available Term Lengths: 5-30 years
Line of Credit Amount: $25,000-$500,000
Fees: Spring EQ does not disclose its fees, but you may be on the hook for an administration fee, credit report and flood certification fees, document prep fees, title report fees, notary or title fees, recording fees and an appraisal fee.

The lender has quick approval times and flexible underwriting criteria, and lets you borrow a high percent of your equity.
Spring EQ offers instant loan qualification and funding in as little as 11 days.
Spring EQ charges an administrative fee and an annual maintenance fee for HELOCs. Spring EQ also charges an appraisal fee, and you’ll be responsible for other third-party fees like a credit check.
Spring EQ doesn’t offer loans in Alaska, Hawaii, Idaho, Missouri, New York, North Dakota, South Dakota, West Virginia or Wyoming. You can apply for a home equity loan or HELOC with Spring EQ online through its website. You can also call the lender at 888-978-9978 to speak with a loan officer.

Methodology

Bankrate’s experts regularly research, review and rate home equity lenders to help you objectively compare and choose a lender that fits your needs. To determine a home equity lender’s Bankrate Score, Bankrate rates lenders on a scale of one to five stars — with five the highest rating — based on a variety of factors relating to the lender’s products and services. To assign our ratings, we assessed each home equity lender across three core areas-

Availability: The minimum loan amount, time to approval, days to close, minimum draw requirement, minimum credit score and loan types offered
Affordability: The minimum APR, intro APR, discounts for auto-payers and fees
Borrower experience: Online application availability, online account access, customer support options, auto-payment and app availability.

View our full methodology here.

What is a home equity line of credit, or HELOC?

A HELOC is a variable-rate home equity product that works like a credit card — you have access to a credit line that you can draw from and pay back as needed. HELOC rates are tied to a benchmark interest rate. As the prime rate moves up or down, so does your HELOC rate. Payments vary depending on the interest rate and how much money you have used.

How does a HELOC work?

With a HELOC, you’re given a line of credit that’s available for a set time frame (known as the draw period), usually up to 10 years. While most HELOCs have an interest-only draw period, you can make both interest and principal payments to pay off the line of credit faster.

When the line of credit’s draw period expires, you enter the repayment period, which can last up to 20 years. You’ll pay back the outstanding balance that you borrowed, as well as any interest owed. A lender may allow you to renew the credit line.

What is a good HELOC rate?

Home equity line of credit rates are determined by your financial assets and liabilities, your credit score and broader economic factors outside of your control. Generally speaking, any rate below the average HELOC would be considered a good rate.

Home equity rates moved up sharply in 2022, reflecting mostly what the Federal Reserve was doing with interest rates — a trend that has continued in 2023, albeit at a slower pace.. That said, lenders often dangle attractive promotional rates to win your business. Just make sure that you’ll be happy with the new (almost certainly higher) rate when it resets in six months to a year.

Who is a HELOC best for?

Because you have the ability to borrow only the amount you need from a HELOC over the draw period, a HELOC works best for people who require access to funds over a number of years — for a series of home improvement projects, for example — and who are comfortable using their homes as collateral.

What should I look for in a HELOC lender?

When you’re shopping for a lender, you should consider a variety of factors. Does the lender’s requirements around loan-to-value and credit score fit your financial profile? Do you prefer doing business with a brick-and-mortar lender or an online company? What are the policies concerning prepayment, refinancing and adjusting the credit line limit? You also should research the company’s geographic availability and consumer reviews.

How do I qualify for a HELOC?

In addition to estimating your home equity, lenders look at your credit history, credit score, income and other debts. Most lenders require a combined loan-to-value ratio (CLTV) of 85 percent or less, a credit score of 620 or higher and a debt-to-income (DTI) ratio below 43 percent to approve you for a home equity line of credit.

How do rising interest rates affect HELOCs?

The Federal Reserve implemented historic rate hikes in 2022 to combat inflation, and has continued raising them, although more modestly in 2023. This action from the Fed has driven HELOC rates higher. “As long as the Fed is active, HELOC rates are going to continue to march higher,” says Greg McBride, Bankrate's chief financial analyst. “The important point for homeowners who have a home equity line is that if the Fed raises interest rates another percentage point, your home equity line is going to go up another point.”

Pros and cons of HELOCs

HELOCs combine relatively low interest rates with the flexibility to borrow what you need when you need it. If you need money over an unpredictable period of time, a line of credit is ideal. However, there are always risks when you take out a loan, especially one that's secured by your home. Here are some of the key considerations for getting a HELOC.

PROS

Lets you tap home equity without disturbing the primary mortgage (nice if you’ve locked in a low rate).
Typically lower upfront costs than home equity loans.
Lower interest rates than with credit cards.
Usually low or no closing costs.
Interest charged only on the amount of money you use.

CONS

Lenders may require minimum draws.
Interest rates can adjust upward or downward.
Lenders may charge a variety of fees, including annual fees, application fees, cancellation fees or early closure fees.
Late or missed payments can damage your credit and put your home at risk.

HELOC vs. home equity loan

While HELOCs and home equity loans are similar in some ways, they have a few distinct differences. These are some of the key factors you should consider when deciding between a HELOC and a home equity loan.

	HELOCS	HOME EQUITY LOANS
Interest Rates	Variable	Fixed
APRs	Slightly lower	Slightly higher
Funds disbursement	Line of credit	Lump sum
Repayment terms	First 5-10 years: Interest-only payments Last 10-20 years: interest and principal	10-30 years of fixed payments
Best for	Ongoing home improvement projects, college tuition payments, medical expenses	Debt consolidation, large home improvement projects, major purchases

HELOC vs. cash-out refinance

A cash-out refinance replaces your current home mortgage with a larger home loan. The difference between the original mortgage and the new loan is disbursed to you in a lump sum. The main difference between a cash-out refinance and a HELOC is that a cash-out refinance requires you to replace your current mortgage, while a HELOC leaves your current mortgage intact; it adds an additional debt to your finances.

A HELOC may be a better option for you if:

You want more flexibility.
You already have a good mortgage rate.
You plan to use your HELOC only for tax-deductible home improvement projects.

A cash-out refinance may be a better option for you if:

You prefer a fixed monthly payment.
You want a lower mortgage rate.
You want to withdraw more home equity.

Other alternatives to a HELOC

A HELOC is not the right choice for every borrower. Depending on what you need the money for, one of these alternative options may be a better fit:

HELOC vs. reverse mortgage

With a reverse mortgage, you receive an advance on your home equity that you don't have to repay until you leave the home. However, these often come with many fees, and variable interest accrues continuously on the money you receive. These are also only available to older homeowners (62 or older for a Home Equity Conversion Mortgage, the most popular reverse mortgage product, or 55 and older for some proprietary reverse mortgages).

HELOC vs. personal loan

Personal loans may have higher interest rates than home equity loans, but they don't use your home as collateral. Like a home equity loan, they have fixed interest rates and disburse money in a lump sum.

FAQs about home equity lines of credit

A HELOC can be a good idea if used for home improvement projects that increase the value of your home. Because a HELOC lets you take out what you need when you need it, it’s best for ongoing projects or expenses.

A HELOC is not a good idea if you don't have a steady income or a financial plan to pay off the loan. Since you use your home as collateral, if you fail to make the payments in full and on time, you risk losing your home.
Like credit cards, HELOCs typically have variable interest rates, meaning the rate you initially receive may rise or fall during your draw and repayment periods. However, some lenders have begun offering options to convert all or part of your variable-rate HELOC into a fixed-rate HELOC, sometimes for an additional fee.
Interest paid on a HELOC is tax deductible as long as it’s used to “buy, build or substantially improve the taxpayer’s home that secures the loan,” according to the IRS. Interest is capped at $750,000 on home loans (combined mortgage and HELOC or home equity loan). So if you had a $600,000 mortgage and a $300,000 HELOC for home improvements on a house worth $1.2 million, you could only deduct the interest on the first $750,000 of the $900,000 you borrowed.

If you are using a HELOC for any purpose other than home improvement (such as starting a business or consolidating high-interest debt), you cannot deduct interest under the tax law.
Due to the fact that HELOCs are revolving lines of credit, they can impact, and even hurt, your credit. When you apply, typically the lender will run a hard inquiry to assess your creditworthiness, and that can have a small impact on your credit score. While a hard inquiry may cause your credit score to drop a few points, you should be able to recover those points if you make timely payments on your HELOC balance.

That said, a HELOC will more significantly hurt your credit score if you fail to make on-time payments or if you miss payments altogether. You also run the risk of losing your home, since a HELOC uses it as collateral.
HELOC interest rates tend to be lower than interest rates for home equity loans and personal loans. However, HELOC rates also tend to be variable, meaning that rates could increase depending on decisions from the Federal Reserve. As rates continue to rise, a HELOC with a variable interest rate might be a riskier proposition for some.
Depending on your lender, you can pay off a HELOC early without being penalized. If you’d like to prepay, try to do it within the interest-only period so you avoid paying more during the repayment time frame. However, some lenders do charge prepayment penalties that could cost up to a few hundred dollars.

Home equity lenders reviewed by Bankrate

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Best home equity line of credit (HELOC) rates for November 2023

What are today's average HELOC rates?

National HELOC interest rate trends

HELOC rates hover at 10 percent

How to get the best HELOC rate

Best home equity line of credit (HELOC) rates in November 2023

Bethpage Federal Credit Union: Best home equity line of credit with a fixed-rate option

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Bank of America: Best home equity line of credit for low fees

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Flagstar Bank: Best home equity line of credit for good credit

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Figure: Best home equity line of credit for fast funding

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Why Figure is the best home equity line of credit lender for fast funding:

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Citizens: Best home equity line of credit for low amounts

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Lower: Best home equity line of credit for quick approval

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PenFed Credit Union: Best home equity line of credit with flexible membership requirements

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PNC: Best home equity line of credit for flexible borrowing options

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TD Bank: Best home equity line of credit for in-person service

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Connexus Credit Union: Best home equity line of credit for fast approvals

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Guaranteed Rate Best home equity line of credit with a fixed rate

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Spring EQ: Best home equity line of credit for online servicing

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Methodology

What is a home equity line of credit, or HELOC?