Home equity loan rates have dropped to their lowest levels in more than three years, offering homeowners an attractive opportunity to tap into their property’s value. According to real estate analytics firm Curinos, the national average rate on a home equity loan currently stands at 7.44%, while home equity lines of credit (HELOCs) average 7.23%. These rates apply to borrowers with credit scores of at least 780 and a combined loan-to-value ratio below 70%.
The decline in second mortgage rates comes as primary mortgage rates hover near 6%, creating a unique situation for homeowners. Many property owners who secured mortgages at 3%, 4%, or 5% are reluctant to refinance or sell, making home equity products an increasingly popular alternative for accessing funds.
Why Home Equity Loan Rates Are Attracting Borrowers
With traditional cash-out refinancing options becoming less attractive, homeowners are turning to second mortgages to unlock their property equity without sacrificing low primary mortgage rates. This shift represents a fundamental change in how property owners manage their finances during a period of elevated interest rates.
Second mortgage rates operate differently from primary mortgage rates. HELOCs typically use a variable rate calculated by adding a lender margin to an index rate, often the prime rate. With the prime rate currently at 6.75%, a lender might add a margin of 0.75% to reach a HELOC rate of 7.50%.
Meanwhile, home equity loans offer fixed-interest products with potentially different margin structures. The fixed-rate nature of these loans provides payment predictability throughout the entire repayment period, making them easier to budget for compared to variable-rate HELOCs.
Finding Competitive Second Mortgage Offers
Lenders maintain considerable flexibility when pricing home equity products. Individual rates depend on credit scores, existing debt levels, and the ratio of the credit line to home value. According to industry data, rates can range from 6% to as high as 18% depending on borrower qualifications.
Some institutions are offering promotional rates to attract customers. FourLeaf Credit Union, for example, currently advertises a HELOC APR of 5.99% for 12 months on lines up to $500,000, though this introductory rate converts to a variable rate after one year.
Additionally, when comparing lenders, borrowers should examine fees, repayment terms, and minimum draw requirements. The draw amount represents the initial sum a lender requires borrowers to withdraw from their available equity, which can significantly impact the overall cost of the loan.
Home Equity Loan Market Outlook
Interest rates have declined throughout most of 2025, according to market reports. Industry analysts expect rates to remain relatively stable through the first half of 2026, suggesting favorable conditions for homeowners considering second mortgages may persist in the near term.
However, borrowers should carefully consider repayment structures before committing. For instance, withdrawing $50,000 from a HELOC at 7.25% would result in monthly payments of approximately $302 during the 10-year draw period. These payments increase during the subsequent 20-year repayment period, effectively creating a 30-year loan obligation.
In contrast, home equity loans provide lump-sum distributions with fixed rates lasting the entire repayment term. This structure eliminates concerns about fluctuating payments and simplifies the decision-making process for borrowers focused solely on rate comparison.
Financial experts note that HELOCs work best for borrowers who can repay balances within shorter timeframes. The funds can be used for home improvements, repairs, upgrades, or virtually any other purpose, offering flexibility that appeals to many homeowners.
Market observers anticipate continued stability in home equity rates through mid-2026, though future Federal Reserve policy decisions could influence the trajectory of both fixed and variable second mortgage products. Homeowners considering these options should monitor rate movements and compare multiple lenders to secure the most favorable terms available for their financial situations.
