A home equity loan lets you borrow against the equity you've built in your home. You receive a lump sum at a fixed interest rate and repay it over a set term, typically 5–30 years. It's sometimes called a second mortgage because it's secured by your property.

Most lenders allow you to borrow 80–90% of your home’s appraised value, minus what you still owe on your mortgage. The exact percentage depends on your credit score — borrowers with scores of 740 or higher may qualify for up to 90% loan-to-value, while 80–85% is more common at lower score tiers. For example, if your home is appraised at $400,000 and you owe $200,000, you could potentially borrow between $120,000 and $160,000 depending on the lender and your creditworthiness.

A home equity loan provides a lump sum with a fixed rate and predictable monthly payments. A HELOC (Home Equity Line of Credit) works like a credit card with a variable rate — you draw funds as needed during a draw period, then repay during a repayment period. HELOCs offer more flexibility, while home equity loans offer more predictability.

Most lenders require a minimum credit score of 620–680 for a home equity loan. However, the best rates are typically reserved for borrowers with scores of 740 or higher. Some lenders may approve borrowers with lower scores but at higher interest rates.

Home equity loan interest may be tax deductible. Prior to 2026, deductions were limited to funds used to buy, build, or substantially improve your home, with a $750,000 cap on total mortgage debt. Beginning in 2026, the Tax Cuts and Jobs Act provisions expired and the rules have reverted — the deduction limit returned to $1 million, and the use-of-proceeds restriction was removed. Because the transition involves nuance based on when your loan originated, consult a tax professional to confirm how the current rules apply to your specific situation.

The home equity loan process typically takes 2–6 weeks from application to funding. This includes the application, appraisal, underwriting, and closing. Some online lenders can close faster, while traditional banks may take longer. Having your documents ready can help speed up the process.

All three let you access your home’s equity, but they work differently. A home equity loan gives you a lump sum at a fixed rate as a second mortgage. A HELOC is a revolving credit line with a variable rate — you draw what you need during a set period. A cash-out refinance replaces your entire primary mortgage with a larger one and gives you the difference in cash. If you have a low rate on your current mortgage, a home equity loan or HELOC lets you keep it. If rates have dropped below your current mortgage rate, a cash-out refinance might save you money overall. Comparing offers for all three helps you find the most cost-effective option.

Focus on four factors: interest rate (fixed vs. variable), total closing costs (typically 2–6% of the loan), borrowing limits and LTV requirements, and funding timeline. A small rate difference can add up significantly — on a $100,000 home equity loan, even a 0.5% rate difference could save over $5,000 over the life of the loan. Getting quotes from multiple lenders and comparing the full cost of each offer, not just the advertised rate, is the most effective way to secure competitive terms.

Home equity loan rates change frequently based on market conditions and the Federal Reserve’s rate decisions. Your individual rate will depend on factors like your credit score, loan amount, loan-to-value ratio, and the lender you choose. HELOC rates tend to start slightly lower but carry variable-rate risk. The best way to find your rate is to request personalized quotes from the lenders listed above and compare their offers side by side.

Most home equity loans close in two to six weeks from application to funding. Some online lenders offer expedited processing and can fund in as little as three to five business days. Factors that affect timing include the home appraisal process, how quickly you submit required documents (pay stubs, tax returns, bank statements), and your state’s closing requirements. Having your financial documents ready before you apply can speed up the process significantly.