Are you thinking about getting home equity loans or credit lines and want to know what the credit score requirements and lending guidelines to get the best equity loans in 2024? The popularity of home equity loans is surging because homeowners want to efficiently finance home improvements, investments, debt consolidation, education,  medical bills and more.

Now is the time to learn about the easiest home equity loan path so you can shop for the best equity loan lenders and rates online. The RefiGuide can help you understand the current home equity loan guidelines and requirements so you can navigate between lenders and opportunities.

What is a Home Equity Loan?

A home equity loan is a second mortgage that gives you a portion of your equity as a single, lump-sum payment that you can use however you like. A home equity loan, often referred to as a junior lien because it sits in a subordinate position on title to your existing mortgage. Like a cash out refinance, home equity loans are powerful financial tools that allow homeowners to borrow money using the equity in their home as collateral.

check home equity loan opportunities from seasoned lending specialists.

People like to borrow money with home equity loans because they are easy to get and the provide a lump sum of money with a fixed interest rate, a set repayment schedule, and predictable monthly payments.

Since these loans are secured by the property, home equity loan rates are generally lower than unsecured loans, making them an appealing option for homeowners looking to access a substantial amount of money while leveraging the equity they’ve built in their property.

How Do Home Equity Loans Work in 2024?

The process of applying for a home equity loan mirrors that of a mortgage application. Whether done online or in-person at a bank, it’s essential to have the following information and documentation ready:

  • Borrower’s Social Security number
  • Employment history and employer details for each borrower
  • Proof of income, including tax returns and the most recent pay stub
  • W-2 statements from the past 2 years
  • Current home loan statement
  • Copy of First Mortgage Promissory Note
  • Homeowners Insurance Declaration Page

For Home equity loan qualifications, your combined loan-to-value ratio (CLTV), credit score, payment history, and income collectively influence the loan amount and available interest rate. Home equity loans typically come with a fixed repayment term and interest rate for the entire duration, although variable interest rate options may be available occasionally.

How to Get the Best Home Equity Loans Online

Home equity loans and HELOC credit lines are very popular in today’s market of rising interest rates. When interest rates rise, homeowners are less likely to refinance their low mortgage rates and more likely to take out a home equity loan. The RefiGuide will help you find the best lenders for home equity loans online with no lending fees. Recent reports reveal that home equity loan guidelines have been changing since the level of interest across the country is surging in popularity because homeowners can keep their existing low interest mortgages while taking out a subordinate loan out for additional cash out. Our team will help you secure the best rates for home equity loan programs available.

Shop and Find Competitive Home Equity Loan Rates Today!

The money you borrow has a low, fixed interest rate that you pay back over 10, 15, 20 or 25 years every month. Home equity loans are considered installments loans because the rates are fixed and the monthly payments are set for the duration of the term. However, unlike an unsecured loan, if you don’t pay the equity loan on time, the mortgage lender could foreclose and take your house. The current home equity loan rates remain steady and low monthly payments are still conceivable.

How much you can borrow depends on your credit history, debt-to-income ratio, and income. Most of the best home equity loan lenders limit you to borrowing 80% of the equity in your home, including what you currently owe on the first mortgage.

Example: Your home is valued at $350,000 this year and you owe $200,000. The lender lets you borrow 85% of the home’s value. So, you can borrow $297,000. Take away the $200,000 you owe, and you can borrow about $97,000.

That isn’t to say that you SHOULD borrow that much money. Sometimes a home equity loan lender will let you borrow more money than you need. It’s smart to calculate how much money you need and leave as much as you can in the home.

The more you borrow, the higher the monthly payment and greater the risk that you might not pay it back. The minimum loan amounts for most home equity programs is $20,000. The maximum loan amount ranges from $100,000 to $1,000,000 depending upon the bank. Many of the new home equity loan lenders continue to publish favorable interest rates on fixed HEL loans and HELOCs.

Take a minute and explore the best home equity loan rates online.

What is the Monthly Payment on a $50,000 Home Equity Loan?

To determine the monthly expense for a $50,000 equity loan at the prevailing average interest rate of 8.8% for a 30-year home equity loan with a fixed interest rate, would be $395.14 for 360 months. The monthly payment for this equity loan is under the assumption of no fees and closing costs thus the APR is 8.8%. The payment for a $50,000 equity loan on a 20 year term would be $441.86 for 240 months based on a 8.75% fixed rate with an APR of 8.75% based on no closing costs or fees as well. The $50,000 home equity loan payment on a 15 year term would be $499.72 for 180 months based on a 8.75% fixed rate with an APR of 8.75% based on no lending fees or closing costs. The RefiGuide will help you shop for the cheapest home equity loans available with your borrowing credentials.

Please Note: The home equity loan qualifications are contingent upon creditworthiness and adherence to lending program directives. Not all programs are accessible in every state or for all loan sums. The home equity loan rates and the terms of the program are susceptible to modification without prior notice, per market conditions and banking guidelines.

What Are the Home Equity Loan Qualifications to Get Financed Today?

Every home equity loan lender is different. But we can say these are typical requirements for home equity loans:

  • At least 15% or 20% equity in the home; the more equity you have, the lower the interest rate because it’s not as risky for home equity loan lenders.
  • A credit score of at least 600. You should have a score around 700 for the best rates, but you can still borrow sometimes with a lower credit score in the 600s.
  • DTI of 43% or lower. Some home equity lenders want you to have a DTI under 40%.
  • The home equity lender will usually want a current appraisal to ensure the home is worth what you want to borrow plus your current mortgage.

How Do Home Equity Loans Work in 2024?

The process of applying for a home equity loan mirrors that of a mortgage application. Whether done online or in person, it’s essential to have the following information and documentation ready:

  • Borrower’s Social Security number
  • Employment history and employer details for each borrower
  • Proof of income, including tax returns and the most recent pay stub
  • W-2 statements from the past 2 years
  • Current home loan statement
  • Copy of First Mortgage Promissory Note
  • Homeowners Insurance Declaration Page

For home equity loan qualifications, your combined loan-to-value ratio (CLTV), credit score, payment history, and income collectively influence the loan amount and available interest rate. Home equity loans typically come with a fixed repayment term and interest rate for the entire duration, although variable interest rate options may be available occasionally.

Is a Home Equity Loan Still Tax Deductible in 2024?

Homeowners frequently ask, “Is home equity loan interest tax-deductible?” The tax deductibility of home equity loan or HELOC (Home Equity Line of Credit) interest has changed in recent years due to the Tax Cuts and Jobs Act (TCJA). The 2018 tax year, the deductibility of interest on home equity loans or HELOCs depends on how the funds are used.

Plus, the interest on the equity loan may be tax deductible if it is used to renovate your home or build a new home. Note there were tax law changes in 2018 that have restricted the tax deduction for equity. If the money is used for something other than home renovation, the interest is not tax deductible anymore.

According to the IRS: From 2018 to 2025, the interest paid on home equity loans or HELOCs linked to your primary or secondary residence, when utilized for purchasing, constructing, or significantly enhancing the property, qualifies as home acquisition debt and may be eligible for tax deductions, subject to specific dollar restrictions.

It’s essential to consult a tax professional or use tax preparation software to determine the specific deductibility of home equity loan interest in your situation. It’s important to remember that home equity loan requirements are set by banks and lender and that tax laws are created by Congress and the IRS. Tax laws can change, and individual circumstances can vary, so getting expert advice is recommended to ensure compliance with current tax regulations.

What Is a Home Equity Line of Credit?

First, a HELOC is a credit line. The lender gives you a line of credit up to your approved amount of equity you can write checks with a HELOC account. You don’t have to use the entire credit line and don’t need to take it all out at once.

Fixed 2nd mortgages usually have a higher overall rate, but the payments are fixed until you pay off the loan. You know exactly what you will need to pay in year 1 and year 10. We suggest that you take a few minutes and compare the HELOC versus the home equity loan, in an effort to make the best decision.

Keys to Home Equity Loan Qualification

Borrowing equity from your house with a home equity loan became popular again in 2024 as more homeowners have higher home values. Inflation, housing demand, and supply chain problems have boosted the values of existing homes across the country. These installment loans offer a hedge against inflation because the best home equity loan rates are fixed for the entire term.

Read more about home equity transactions from the FTC.

It is tempting to borrow some of that equity to make home improvements, pay off credit cards, or fund college tuition. But you need to figure out if you will be able to handle the additional debt payments. Also, the home is on the line when you borrow against it with a home equity loan.

So, a home equity mortgage can make a lot of financial sense because of the high amount you can borrow and the low interest rates. Just make sure you can pay it back. Once you crunch the numbers and determine your needs, talk to home equity loan lenders about a fixed rate second mortgage. Find out more on tax incentives for HELOC interest today.

fixed home equity loan

What Are the Home Equity Loan Lenders Requiring to Get Approved Today?

Ok, let’s get into how the home equity loan work. The 2nd mortgages have specific requirements for loan to value, debt ratio and credit score. Many of the best equity loan lenders will ask for the following:

  • Minimum of 20% equity in your home.
  • Credit score in the mid-600s, (most are looking for a 680 middle score)
  • Debt-to-income (DTI) ratio Below 43%
  • Steady job with satisfactory disposable income (most will want traditional income documentation ie. pay-stubs and W2’s)

One of the greatest things about owning a home is building equity. As you make your payments and the home’s value rises, you can build hundreds of thousands of dollars in equity that you can sometimes borrow against.

While some homeowners do a cash-out refinance to tap equity, what about if you already have a low interest rate? That’s when you may consider a second mortgage and home equity loan. If you are thinking about tapping your equity with an affordable financing, let’s look at what the home equity loan requirements are.

Home Equity Loan Overview

A home equity loan is a second mortgage that allows you to borrow up to 80% of the equity in your house. A home equity loan is a single, lump sum payment that represents most of the equity in the property.

Home equity loans have a fixed interest rate that usually ranges between 7,5% and 10% in 2024, depending on the markets and your credit rating. You pay the money back in monthly payments over a fixed term, usually 10 or 20 years. Home equity loan rates are usually fixed, while a home equity line of credit (HELOC) has variable rates.

Why Would You Want a Home Equity Loan?

  • Fixed payments. If you like predictable payments that do not change, a home equity loan could be for you. You will always pay the same amount every month until the loan is fully paid. Home equity loan rates are fixed for the life of the loan. They are a considered an installment loan and in the past, the interest was tax deductible in most cases.
  • Lower costs: The interest rate for borrowing equity is usually lower than personal loans and credit cards. That’s why many people use home equity loans to pay off credit card debt.
  • Longer terms: You have a variety of terms available on home equity loans, depending on the lender – 5 to 30 years.

HELOC and Home Equity Loan Requirements

Whether you choose a HELOC or home equity loan, you will need to qualify on your finances and credit to be approved. The exact requirements vary from lender to lender, but usually you need:

  • At least 20% equity in the home
  • Low credit risk
  • Satisfactory debt to income ratio
  • Enough income to pay the first and second mortgage and other debts
  • Timely payment history from the last two years.

Can You Get a Home Equity Loan without Refinancing Your Mortgage?

Yes, one of the main points of getting an equity loan is to tap into your home’s equity without refinancing your first mortgage. This holds true for investment properties as well. One of the biggest benefits of home equity loans is leaving your mortgage alone and getting cash out through the second mortgage transactions.

The Power of Having Equity In Your Home

To qualify for a home equity loan, you need to have 15% or 20% equity in the property, depending on the lender. Equity is defined as how much you owe on your first mortgage and the home’s market value. These figures are used to calculate your LTV which determines if you can get the loan.

Let’s say you have a mortgage balance of $150,000 and the value of the home is $450,000. You divide the loan balance by the home value to get 33%. So, you have 67% equity in the home.

This number also tells you how much money you can borrow. You can usually borrow 80% or 85% of the home’s appraised value. So, in this example, 85% of the value of the home is $382,000. If you owe $150,000, you can borrow about $232,000 with your equity loan. Appy for a home equity loan today.

How can you build equity in the home?

  • Pay the mortgage on time. Paying down the home loan over many years increases the equity in the home. Making more than the minimum payment grows your equity more quickly.
  • Do home renovations: You can improve the home to boost its value. If you use your home equity loan to make improvements, you may be able to write off the mortgage interest. Find swimming pool loans today.
  • Home increases in value: Real estate general increases in value over time. As time passes, the property should rise in value, so you will have more equity.

The Importance of Credit Score for Home Equity Loans

It’s important to have good credit to be approved for a equity home loan. Standards vary, but most lenders will reserve the lowest rates for people with a credit score of 700 and higher. However, some home equity lenders may approve you with a credit score between 620 and 699, but you will probably have a higher interest rate.

If you don’t have a credit score of at least 650, it may be best to pay down debt and improve your payment history before applying for home equity loans.

Home Equity Loan DTI of 43% Or Lower

Another key point is what your debt-to-income ratio or DTI is. Some equity home lenders may want your DTI to be under 36% of your gross monthly income, but there may be lenders that allow 43%.

Before you apply for an equity loan, you need to make sure you meet the minimum home equity loan guidelines and figure out what your DTI is. If it’s above 43%, you may not be approved, or there will be a higher interest cost to the loan.

Home equity loans can be a good choice for someone who needs equity for one large purchase, such as a year or two of college tuition.

However, if your need is for money over a longer period and in installments, a home equity line of credit may be preferable. Talk to your mortgage lender about both second mortgages to find out which works better for your situation.

What Credit Score Is Needed for Home Equity Loans and Credit Lines?

Is your home rising in value? Do you have at least 20% of your mortgage paid off? Then you could be a great candidate for a home equity loan.

According to Experian, a home equity loan or second mortgage that lets you borrow some of your home’s equity without having to sell the house. If you qualify for the mortgage, you can take 80% or 85% of the home’s value (including your mortgage amount remaining) in cash.

A home equity loan is a lump-sum payment with a fixed monthly interest rate. Interest rates vary by lender, but you can expect a rate of 8-10% if you have decent credit in many situations in 2024.

The interest rate on a home equity loan is higher than a first mortgage because it’s a higher risk for the lender if you default. But the rate is still much lower than most credit cards and personal loans. For that reason, home equity loans are a popular choice for home improvements, college tuition, and paying off debt.

A home equity loan may be a wise financial decision if you need a lump sum of cash. However, people who need money in installments over several months or years may be better suited to a home equity line of credit (HELOC).

A home equity line is a secured credit line that uses your home’s equity. You only pay interest on the amount of money pulled out. A home equity loan, on the other hand, requires paying interest on all the money from the beginning of the loan.

With home equity loans, you have fixed monthly payments over five to 25 years, in most instances. When it’s paid off, you cannot take money out again without another approval.

A HELOC can be paid off and reused, if your credit is good enough. HELOCs also have variable interest rates and usually have a lower teaser rate during the first six to 12 months.

home equity lines

What Is the Minimum Credit Score Is Needed for Home Equity Loans and Credit Lines?

If you have a lower credit score, the lender may put more emphasis on your debt-to-income ratio or DTI. Your DTI measures your total monthly debt payments compared to your gross monthly income.

Minimum Credit Score Requirements for a HELOC

You need decent credit to be approved for a home equity loan. Most home equity lenders give the best rates to people with at least a 700-credit score. However, you may qualify if your credit is between 620 and 699. Your rate will be higher and the repayment term may be shorter. If you a credit score below 600, you will need to have at least 25% equity.

Most home equity brokers want a DTI of 40% to 43%. If you have a credit score under 700, having a low DTI may get you approved faster.

Another factor with a lower credit score is how much equity is in the home. Many HELOC lenders want at least 20% equity to borrow money. But if your credit score is well below 700, having more equity will assure the lender that you will pay it back.

The more equity in the home, the less lender risk. Most people are more likely to pay a loan when they have a lot of equity in the home. Remember if you don’t make the payments on time, the lender has the right to foreclose.

Credit Score Requirements for Home Equity Loan Programs

Most of the best home equity loans have fixed rates that you pay back in five or 10 years. People who prefer financial certainty often prefer a home equity loan. If you are ok with a changing interest rate that may have lower payments up front, a home equity line of credit is a good choice.

If your credit score is below 700, you can still get a loan possibly, but you will have a higher rate and more stringent loan requirements. You can get better terms and interest rate if you pay down debt and improve your payment history. The minimum credit score is 640 if you have 10% equity after adding the equity loan.

However if you have 25 or 30% equity in your home the minimum credit score could be as low as 600.

Also, try to lower your DTI so you can still qualify for a lower rate even with a mediocre credit score.

A home equity loan is one of the most popular financial products today. As more homeowners have high amounts of home equity, it’s common to borrow some of that money for various reasons.

A popular option is to take money out to renovate the property. When you add value to the home with renovations, you are paying yourself back in a way.

Plus, when using the money to improve the home, the interest on the loan may be tax deductible. This can save you hundreds or even thousands on your taxes in the year after you take out the money.

There are many home equity loans on the market, so talk to your lender today to find out if a home equity loan is a good fit for you. If not, a HELOC also may be a good choice. This type of financing is very popular and the banks continue to expand the home equity loan guidelines.

Are there Guaranteed Home Equity Loans for People with Low Credit Scores?

Many Americans want to get a home equity loan in 2024. Home prices have risen quickly in the last two years, with some areas seeing appreciation of 20% or 30%. It’s not surprising that homeowners want to pull out some of that cash to pay off debt or do home renovations. Home equity loans are great tools for homeowners to consolidate debts and credit cards to lower monthly payments.

If you have a credit score below 600, learn more about how to get a home equity loan with a low credit score? Below is essential information to know if you’re in this situation. Find banks that give home equity loans with bad credit.

Home Equity Loans and Credit History

The best way to get a poor credit home equity loans is to have plenty of income and a low debt-to-income (DTI) ratio. Also, you should have at least 15% equity in the property.

If you have a credit score in the low 600s and can meet the above qualifications, you may be able to get approved. In fact, getting a home equity loan with bad credit and the above criteria may be easier than qualifying for a personal loan.

This is because home equity loans are secured by the property. If the house is collateral for the loan, the bank has some assurance you will pay it back. After all, you are borrowing equity from the house and must pay it back to keep the house.

Equity Loan Qualifications for People with Average Credit

Not every lender will lend to you if you have bad credit, but expect to see qualifications such as:

  • 15% to 20% equity in the home
  • At least a credit score of 621
  • A DTI of no more than 43%, but a few home equity loan lenders may allow 50%
  • No late payments on anything on your credit report in the last two years
  • Stable income and employment history

A few lenders may approve someone with a 620 credit score, but it’s harder in 2023 to find them. Check with several home equity loan lenders to see what their credit criteria is on home equity loans presently.

It also can help to look for credit from small local banks or credit unions that don’t state a minimum credit score for an equity loan approval.

Steps to Apply for a Home Equity Loan with Low Credit Scores

First, review your credit report. You can order yours for free once per year from AnnualCreditReport.com.

Check for any mistakes on your credit report. If you find anything you think is wrong, contact the credit agency and ask for it to be investigated and removed.

It’s important to regularly review your credit report so you can make sure you have a clean payment history for at least the last year.

When you have damaged credit, it’s unlikely you will be approved for a home equity loan if you have late payments in the last 12 to 24 months.

Second, look at your DTI. Your DTI is a comparison of your monthly debt payments to your monthly gross income.

Say you have $2,000 of monthly debt payments and a $5000 monthly income. So, your DTI is 40%. This may be higher than optimal for some home equity loan lenders, but some might approve you with plenty of income to cover your debt payments.

The higher your DTI with low credit scores, the harder it is to be approved for a home equity loan. Even if you make all your payments on time, there is a chance that a financial problem could make you late on your home equity loan payments.

Keep the DTI as low as possible, but most experts recommend having it below 43%.

Third, you need to have enough equity in the home, and it’s even more important with bad credit. It’s true you can qualify with some lenders with only 15% equity in the home. But the more equity you have with bad credit, the better your rate and terms.

For instance, say your home is worth $400,000 in 2024. If you have $250,000 on the loan, you have an LTV of 62.5%. This means you have 37.5% equity, which is plenty of equity to qualify for a home equity loan.

Last, think about how much money you need to borrow. Most home equity loan lenders let you take out 80% or 85% of the home’s value, minus what is owed on the loan.

Let’s say you have a $400,000 home and the maximum you can take out is $340,000.  Subtract what you owe – $250,000 – and you can get a total of $90,000.

However, do you really need $90,000? The more you take out, the higher the payment, and the harder to qualify for the loan with bad credit. So, carefully calculate how much you need to borrow before filling out the application. If you need $25,000 for a home improvement, maybe take out $30,000 to be safe and leave the rest in the home.

A home equity lender will be more skeptical about approving the loan with bad credit if you take out as much as possible.

It is possible to qualify for a home equity loan with poor credit! Just remember the above tips and check with several equity lenders, and you may get the cash you need.

Is It Smart to Take Out Equity on Your Home to Pay Off Debt or Use a Credit Card?

Getting a new home equity loan or a flexible home equity line of credit (HELOC) to get equity to pay off your credit cards can make financial sense. Credit cards usually have a much higher interest rate than home equity loans.

However, there are risks involved to consider. Most significant is the risk that you cannot make your home equity loan payments and lose the home. While not paying credit-cards can cause problems, it’s not as bad as foreclosure. Home equity loans are great choices for debt consolidation as long as you have the ability make the monthly payment on time.

How to Use a Home Equity Loan to Pay Off Credit Cards

To pay off high-interest loans with equity, you need to qualify for a second mortgage – either a home equity loan or HELOC. Equity is the part of the value of the property you don’t owe the lender.

If a home is worth $350,000 and you have a balance of $250,000 on the loan, you have $100,000 of equity. A home equity loan, which is a lump-sum payment to you, lets you access part of that $100,000.

The money can be used in any way you like and you usually have 20 or 30 years to pay it back. With the longer repayment period and a fixed interest rate, you can save hundreds of dollars per month in interest charges on credit cards.

Why Borrow Home Equity?

The biggest reason it’s usually the cheapest money you can borrow because of the low interest rate. The money is backed by the home you live in, so you are more likely to pay it back. Other benefits of using a home equity loan or HELOC to pay off credit cards are:

  • Lower interest rates: Credit cards these days can have 20% or higher interest rates. Today’s home equity loan rates may range from 7 to 10%. Some lenders offer a HELOC with reduced starting rate that varies. Either way, that’s a lot of saved interest.
  • Long repayment time: You can often take out a home equity loan for 30 years, so the payments are lower.
  • Low monthly payments mean better monthly cash flow.
  • You can borrow more: Depending on the equity in the home, you can probably borrow a lot more than with a personal loan.
  • Fixed interest rates: A home equity loan has a fixed rate, while credit cards vary.

Limits On Borrowing Equity

The go-go days of the early 2000’s are behind us. Gone is the time when you could borrow 100% or 105% of your home’s value. Today, you need to leave 15% or 20% equity in the home. Doing so reduces the home equity lender’s risk.

Some home equity loan lenders might only let you borrow 70% of the home’s value (combined with what you owe on the mortgage), while others may let you access 90%. It depends on the lender and your credit score and debt load.

Let’s say your home is worth $350,000 and you owe $250,000, so you can access $100,000. You have borrowed about 71% of the home’s value already, so you can access $30,000 if the maximum you can borrow is 80%, or $65,000 if you can borrow 90%.

Downsides to Using Equity to Pay Off Credit Cards and Unsecured Debt

If you are disciplined, using equity to pay off credit cards can work well. But there are downsides to consider:

  • The home is collateral for the loan. Both types of second mortgages are secured by the home, so if you don’t pay, you could lose the home. There is no collateral for credit cards, so you don’t usually risk anything other than a damaged credit score.
  • Home could be harder to sell: If you borrow equity, there is a chance home values could crash and make it hard to sell. This is what happened during the mortgage meltdown in 2009 to many borrowers.
  • Pay higher interest: Your annual interest rate is lower but you are paying a loan for many years, so you could pay more interest overall.
  • Closing costs: Most second mortgages have closing costs, so factor them into your decision.

The Leverage Home Equity 

Paying off credit cards with home equity may be a smart move, if you have discipline and stable finances. Talk to your mortgage lender today to learn what the qualifications are for the best home equity loan or HELOC.

How to Get Cash with the Equity in Your House with an Equity Loan or a Home Equity Line of Credit

About 65% of American homeowners saw their equity rise by $3 trillion from 2022 to 2023. That means the typical borrower realized about a $51,000 gain in equity over just 12 months. With so much equity available, people are asking how to get cash with their home equity. Many people have a chance to get the cash they need from their homes with a 2nd mortgage or home equity line of credit. If you have been calculating home equity and considering pulling out cash, our helpful home equity guide will help with your decision.

Why Take Out Home Equity Loan Today?

The Federal Reserve has hiked interest rates twelve times in the last few years, so mortgage rates are the highest they have been in over two decades. Most homeowners that purchased their house prior to 2021, have interest rates locked in between 2,5 and 3.5%, So, when these borrowers want to tap their equity to get cash it makes sense to leave their existing mortgage alone and take out a home equity loan to meet their financing needs.

The biggest benefit of using home equity is it provides a large amount of cash with a relatively low interest rate. Most Americans can access this cash at much lower rates than with a credit card. For example, the average credit card interest rate this year is almost 17%, but the average rate for a HELOC is only slightly higher than first mortgage rates. Imagine the thousands in interest you can save by taking cash out of your home versus an unsecured personal loan.

Final Talking Points on the Home Equity Loan

Financial experts point out that home equity is often the least expensive form of financing that most homeowners can access. So, now that you know what a home equity loan is, it’s time to decide if this is a wise financial move for you.

The money is secured by your home, so you can tap the money at a lower interest rate.  In 2024, with rising interest rates, homeowners are less likely to refinance their low rate mortgages but more likely to take out home equity loans because they need cash and can leave their first mortgage alone.