Home equity loan rates and home equity line of credit (HELOC) rates are approaching their lowest levels in more than two years, creating opportunities for homeowners to tap into accumulated property value. According to real estate analytics firm Curinos, the national average HELOC rate currently stands at 7.23%, while the average home equity loan rate is 7.44%. These rates apply to applicants with a minimum credit score of 780 and a combined loan-to-value ratio below 70%.
The decline in home equity loan rates represents a significant shift from the higher borrowing costs seen throughout much of 2023 and 2024. For homeowners who have built substantial equity as property values have appreciated, these lower rates provide an attractive financing option without sacrificing favorable primary mortgage rates.
Why Home Equity Loans Are Gaining Appeal
With primary mortgage rates remaining in the low-6% range, many homeowners are reluctant to sell their properties or pursue cash-out refinancing. Selling would mean giving up historically low mortgage rates that many locked in at 5%, 4%, or even 3% in recent years. A cash-out refinance would similarly require replacing those favorable terms with higher current rates.
Additionally, second mortgages offer flexibility that traditional refinancing cannot match. A HELOC provides draw-as-needed access to funds, while a home equity loan delivers a lump sum with fixed repayment terms. Both options allow homeowners to leverage their equity while preserving their existing mortgage arrangements.
How Second Mortgage Rates Are Calculated
Home equity interest rates operate differently from primary mortgage rates. According to industry standards, second mortgage rates are typically calculated using an index rate plus a lender-determined margin. The index is often the prime rate, which currently sits at 6.75%.
However, lenders have considerable flexibility in setting margins based on individual borrower profiles. Your actual rate will depend on factors including credit score, existing debt levels, and the credit line amount relative to home value. Meanwhile, home equity loans may carry different margins than HELOCs because they offer fixed rather than variable interest rates.
Current Market Offerings and Shopping Strategies
Promotional rates can significantly reduce initial borrowing costs. For example, FourLeaf Credit Union is currently offering a HELOC APR of 5.99% for 12 months on lines up to $500,000, according to recent market data. This introductory rate converts to a variable rate after one year.
In contrast, home equity loan lenders may be simpler to compare because fixed rates remain constant throughout the repayment period. Borrowers face just one rate to evaluate rather than tracking variable adjustments. The absence of draw minimums with lump-sum equity loans also simplifies the decision-making process.
When comparing lenders, rates can vary dramatically from 6% to as high as 18%. This wide range underscores the importance of shopping multiple institutions and understanding how creditworthiness affects pricing. Borrowers should also compare fees, repayment terms, and minimum draw requirements before committing.
Market Outlook and Borrowing Considerations
Interest rates have declined steadily throughout most of 2025 and are expected to remain relatively stable through the first half of 2026, according to market forecasts. This stability makes the current environment favorable for securing second mortgages. Homeowners can use withdrawn equity for home improvements, repairs, upgrades, or virtually any other purpose.
The repayment structure differs significantly between HELOCs and home equity loans. A $50,000 HELOC withdrawal at 7.50% interest would require monthly payments of approximately $313 during the 10-year draw period. However, payments increase during the subsequent 20-year repayment period, effectively creating a 30-year loan. HELOCs work best when borrowers repay balances within shorter timeframes rather than carrying debt across the full term.
Market analysts expect home equity loan rates to remain competitive in the coming months, though the timing of future rate movements remains uncertain. Homeowners considering these products should monitor rate trends and consult with multiple lenders to secure optimal terms.
