A home equity loan is a fixed-rate lump sum of money that you can borrow based on the equity, or ownership stake, in your home. If you have paid off 15% to 20% of your house, this one-time installment loan can be used for major expenses like home renovations or debt repayment. While home equity loans have fixed interest rates, making monthly payments predictable and easy to budget for, your home serves as collateral for the loan, putting you at risk of foreclosure if you fall behind on repayments. Experts have weighed in on the pros and cons of home equity loans, how they function, and where to find the best rates.
As of June 19, 2024, average home equity loan rates are as follows:
– 10-year, $30,000 home equity loan: 8.74%
– 15-year, $30,000 home equity loan: 8.73%
– $30,000 HELOC: 9.16%
These rates are based on a survey conducted by Bankrate, and while they may vary depending on the lender and loan type, they generally tend to be lower than personal loans or credit card annual percentage rates. Home equity loan rates are not directly set by the Federal Reserve, but changes to the federal funds rate can impact borrowing costs for products like home equity loans and HELOCs.
Since March 2022, the Fed has raised its benchmark rate 11 times to combat inflation, leading to increased home equity loan rates. It is projected that these rates will remain high until the central bank begins to cut interest rates later in the year. Home equity loans allow you to access your equity without affecting the rate on your primary mortgage, making them a popular option for homeowners. Using a home equity loan for home improvements or other investments can also increase your home’s value.
Many homeowners in 2024 are choosing home equity loans or HELOCs over cash-out refinances to maintain their attractive interest rates. Various lenders offer competitive rates and terms for home equity loans, with U.S. Bank, TD Bank, Connexus Credit Union, KeyBank, and Spring EQ being among the top options in June 2024. Each lender has its own APR, loan amount, terms, and perks, so it’s essential to compare and choose the best option based on your individual needs and financial situation.