Best Home Equity Loan Lenders Guide

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 lowest home equity rates in 2025? The popularity of home equity loan credit is surging because homeowners want to get the best rates for home improvements, investments, debt consolidation, education, medical bills and more. Homeowners come to the RefiGuide to find the best home equity loan companies online and shop for competitive rates and terms.

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

Now is the time to learn about the easiest equity home 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. Ultimately, we’ll help you secure the best home equity rates that match your personal credentials.

Ok, let’s get into how the home equity loan works. These 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.

What Types of Home Equity Loans Are Available?

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

• Fixed Rate Home Equity Loans
• No Doc Home Equity Line of Credit
• Hard Money Home Equity Loans
• Private Home Equity Loans
• DSCR Home Equity Line of Credit

The best home equity loan rates usually ranges between 7,5% and 10% in 2025, 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. The traditional home equity loan rates are usually fixed, while a home equity line of credit (HELOC) has variable rates. Make sure when you compare the lowest home equity loan rates that you are comparing the annual percentage rates as well. (APR)

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 mortgage, often referred to as a junior lien because it sits in a subordinate position on title to your existing mortgage.

Like cash-out refinancing, equity loans are powerful financial tools that allow homeowners to borrow money using the equity in their home as collateral.

People like to borrow money with home equity line 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, fixed 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 Does a Home Equity Loan Work in 2025?

The best home equity loan works by using the home as collateral. The bank or lender assesses the amount of equity the homeowner has, which is typically the difference between the home’s current market value and any remaining mortgage balance. Based on this equity, the lender provides a loan amount, often up to 80-90% of the home’s appraised value. The borrower receives the funds in a single lump sum and repays the loan with fixed monthly payments over the agreed term.

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. Typically, home equity loans work with a fixed repayment term and interest rate for the entire duration, although variable interest rate options may be available occasionally. Learn how to calculate home equity to determine the loan to value.

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 mortgage rates rise, homeowners are less likely to refinance their low mortgage rates and more likely to take out a second mortgage. 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.

How Long Are Home Equity Loan Terms?

Home equity loan terms generally range from 10 to 30 years, with 10- to 15-year terms being the most common. Some of the top home equity loan lenders offer a 20 and 25 year term as well. The term length affects the monthly payment and total interest paid over the loan’s life. Shorter terms typically have higher monthly payments but cost less in interest overall, while longer terms have lower monthly payments but more interest paid in total.

• 10 Year Fixed
• 15 Year Fixed
• 20 Year Fixed
• 25 Year Fixed
• 30 Year Fixed

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 line 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 2nd-mortgage on time, the home equity loan 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 providers limit you to borrowing 80% of the equity in your home, including what you currently owe on the first mortgage. The RefiGuide can help you connect with lenders that offer higher LTV equity loans.

Example: Your home is valued at $350,000 this year and you owe $200,000. The home equity loan 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 lenders continue to publish favorable pricing on fixed rate 2nd mortgages and HELOCs. Take a minute and explore the best HELOC loan rates online.

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 a home equity loan lender.
• 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. Low-credit home equity loans will have a higher interest rate.
• 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. Check out the no appraisal HELOC.

Is a Home Equity Loan Still Tax Deductible in 2025?

Homeowners frequently ask, “Is home equity loan interest tax-deductible?” The tax deductibility of home equity loan or Home Equity Line of Credit interest has changed in recent years due to the Tax Cuts and Jobs Act (TCJA). The 2025 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 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 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 equity home 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. Shop today’s second mortgage rates from competitive lending companies. We always suggest negotiating closing costs, origination fees and home equity loan rates.

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 home equity line of credit and you also don’t need to take it all out at once. The home equity line of credit has variable interest rates, so you have to plan and budget accordingly.

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. It is always wise to shop and compare fixed rate loans to HELOC interest rates.

Frequently Asked Questions on Home Equity Loans

Are there closing costs with a home equity loan?

Yes, home equity loans typically include closing costs ranging from 2% to 5% of the loan amount. These may cover appraisal fees, title search, credit checks, and origination fees. Some lenders offer no-closing-cost options, which may come with slightly higher interest rates to offset the waived fees.

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. Sometimes the most competitive home equity loan rates are achieved when a borrower holds steady on their primary mortgage.

What do appraisers look at for a home equity loan?
Appraisers evaluate the property’s condition, square footage, number of rooms, location, comparable property sales, and any improvements made. These factors help determine your home’s current market value. An appraiser’s job is to report the current market value of a property while providing comparable homes that have sold recently. This helps lending underwriters consider the risk when approving a home equity line of credit or loan. The most important factor for an underwriter when considering appraisal is home value. In order to determine an accurate combine loan to value (CLTV) the bank needs an appraisal that is trust worthy.

What documents are needed for a home equity loan?
Common documents include proof of income, tax returns, property deed, homeowner’s insurance, a recent mortgage statement, and a credit report.

How does a home equity loan work for home improvements?
Most home equity loan programs provide all the funds up-front based on your home’s equity that you can use for home improvements. It typically has fixed monthly payments and interest, making it easier to budget for renovation costs.

Can you pull equity out of your home without refinancing?
Yes, you can access your home’s equity without refinancing through an equity loan or a home equity line of credit, both of which use your home as collateral.

Do home equity loans require homeowners insurance?
Yes, in most cases the home equity loan lenders require homeowners insurance on the property to protect against damage or loss since the home serves as collateral.

How long does it take for a home equity loan?
The process typically takes two to six weeks, depending on the lender, required documentation, appraisal, and underwriting. Many self-employed borrowers report the process taking longer as the underwriter is reviewing additional income documentation in many instances.

Who does home equity loans on manufactured homes?

Many borrowers are looking for a home equity loan on a manufactured or modular home. We even get questions like, “Who does home equity loans on mobile homes? The list of banks and lenders changes all the time, but the RefiGuide can help connect with banks and lenders offering manufactured home equity loans this year. In some cases closing costs may be higher when taking out a second lien against a manufactured, modular or mobile home.

Can I get home equity loan on an inherited property?

The answer is yes, but approving a HELOC or equity loan on an inherited property may be more complex. Many times there will be multiple borrowers and the risk factor is higher with inherited properties because the default rate is higher. Therefore the home equity loan lender requires more equity and a lower loan to value (LTV). In many cases you can expect higher home equity loan closing costs as well. Lenders may require proof of ownership, property value, and clear title.

How to pay off a home equity loan faster?
Paying more than the minimum payment, making biweekly payments, or applying extra payments directly to the principal can help you pay off the loan faster and reduce interest costs.

What is a home equity investment?
A home equity investment agreement allows a third-party company to invest in a portion of your home’s future value in exchange for cash upfront, without monthly payments or interest. The investor gains from your property’s appreciation when you sell. This popular new equity sharing agreement, that investors are offering a select group of homeowners, called a home equity investment. The borrower gets a lump-sum of cash and there is no mortgage payment.

What is the combined loan-to-value requirement for home equity credit loans?
Most lenders require a combined loan-to-value (CLTV) ratio of 85% or less for home equity credit loans, such as HELOCs. This means the total of your existing mortgage and the new home equity credit line must not exceed 85% of your home’s appraised value. Some lenders may allow higher CLTVs for strong-credit borrowers.

What is a closed-end home equity loan?

A closed-end home equity loan is a second mortgage that provides a lump-sum payout with a fixed interest rate and repayment term. Unlike a HELOC, which offers a revolving credit line, a closed-end loan has set monthly payments over a fixed period—usually 5 to 30 years. It’s ideal for borrowers needing predictable payments.

Can you have more than one home equity loan? Yes, it’s possible to have more than one home equity loan, but it depends on your home’s available equity, credit profile, and lender guidelines. Most lenders require a combined loan-to-value ratio under 85%. Having multiple home equity loans increases your risk and may affect approval, so careful financial planning is essential.  There are still a few hard money lenders that offer 3rd-mortgages but the rates are much higher, the closing costs are higher and they require a lot more equity.

Can I get a home equity loan for construction?  Yes, you can use a home equity loan to fund construction projects or renovations. The fixed rate and predictable payments make it ideal for budgeting large improvement costs. Ensure you have sufficient equity and a clear construction plan, as some lenders may request contractor bids or cost estimates.

Are there home equity loans for self-employed?  Yes, self-employed borrowers can qualify for home equity loans, though documentation may vary. Many lenders offer alternative verification methods, such as bank statements, asset-based underwriting, no doc and stated income equity loan programs. A strong credit score, consistent income, and sufficient equity improve approval chances for self-employed applicants.

Can I get a home equity loan in 2nd position in California? Yes, many lenders in California offer second-position home equity loans, meaning the new loan sits behind your first mortgage. These are common for homeowners wanting to access equity without refinancing their first loan. Approval depends on your combined loan-to-value ratio and credit profile.

Can I get a home equity loan introductory rate? Some lenders offer HELOCs with introductory rates, typically lower for the first 6 to 12 months. These promotional rates help reduce early interest costs but adjust to the standard variable or fixed rate after the introductory period. Review terms carefully before applying.

 Can you get a home equity loan on a double-wide? Yes, you can get a home equity loan on a double-wide manufactured home if it’s permanently affixed to a foundation, titled as real property, and located on owned land. Lenders may have stricter requirements for manufactured homes, including higher credit scores and lower LTV limits.

Keys to Home Equity Loan Qualification

Borrowing equity from your house with a home equity loan became popular again in 2025 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 most attractive 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 with a fixed interest rate.

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

• 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 a fixed rate installment loan and in the past, the interest was tax deductible in most cases. If rates drop you are allowed to refinance a home equity loan with no pre-payment penalty in most cases.
• Lower closing costs: The interest rate for borrowing equity is usually lower than personal loans and credit cards. That’s why many people use fixed rate home equity loans to pay off credit card debt. Always consider closing costs and lending fees when considering lenders.
• Longer terms: You have a variety of terms available on fixed rate home equity loans, depending on the lender – 5 to 30 years.

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 Equity Home Loans

It’s important to have good credit to be approved for a equity home loan. Standards vary, but most home equity loan lenders will reserve the lowest rates for people with a credit score of 700 and higher. However, some competitive 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.

These subordinate 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 the right home equity loan lender about both second mortgages to find out which works better for your situation.

What Credit Score Is Needed for Home Equity Loans, 2nd Mortgages 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.

An equity loan is a lump-sum payment with a fixed monthly interest rate. Interest rates vary by home equity loan 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, the popular loan is the 2nd mortgage for home improvements, college tuition, and paying off debt.

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 this type of fixed rate 2nd-mortgage.

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.

Are there Home Equity Loans for People with Credit Problems?

Many Americans want to get the best home equity loan in 2025. 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.

The RefiGuide will help you locate bad credit home equity loan lenders that have more relaxed credit requirements and guidelines.

Fixed rate home equity loans are great tools for homeowners to consolidate debts and credit cards to lower monthly payments. Most lenders are offering home equity loans for people with good credit scores.

If you have a credit score below 600, learn more about you will need to work with bad credit home equity lenders. Below is essential information to know if you’re in this situation. Find banks that give the best home equity loans for poor credit.

Equity Home Loan Qualifications for People with Fair 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 companies 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 2024 to find them. Check with several lenders to see what their credit criteria is for the best home equity loans for fair credit profiles. 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. Our team will help you apply for a home equity loan with below-average credit scores at no cost to you.

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 with debt consolidation and borrowing money.

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.

Fixed payment home equity loans for credit card consolidation can be a great choice as long as you have the ability make the monthly payment on time.

Learn more about why so many borrowers are choosing second mortgages for debt consolidation.

How to Use a Home Equity Loan to Pay Off Credit Cards and High Interest Debt

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. An equity home 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 fixed rate 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. However the home equity line of credit has variable interest rates.

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.

How to 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 equity loan or home equity line of credit.

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 2024 to 2025. 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 2^nd 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 Tips for Getting the Best Home Equity Loans

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 2025, with elevated 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.

Share on Facebook

Tweet

Follow us