Home equity: the cheapest money you can borrow — and the riskiest
A HELOC averages 7.90% today, far below a 11.57% personal loan or a 21.52% card. The reason it is cheaper is the reason to be careful: the loan is secured by your house.
| Product | Typical rate | How it works |
|---|---|---|
| HELOC (variable) | 7.90% | Draw as needed; rate moves with prime |
| Home equity loan (fixed) | 8.24% | Lump sum, fixed payment |
| Cash-out refinance | 6.78% | Replaces your first mortgage |
Source: Representative July 2026 pricing. Actual rates depend on your equity, credit, and combined loan-to-value.
Your equity is the slice of the home you actually own — its value minus what you still owe. Three products let you borrow against it, and they differ in structure more than in price. A HELOC A revolving credit line secured by your home, usually at a variable rate; you draw and repay as needed. Full definition → works like a credit card backed by the house. A home equity loan is a fixed lump sum. A cash-out refinance replaces your first mortgage with a larger one and hands you the difference.
All three are secured Backed by an asset the lender can seize on default — here, your home. Full definition → by the property, which is why they undercut every unsecured option. It also means the downside is not a dinged credit score but foreclosure. Converting unsecured card debt into a home-equity balance can save real interest — and can also turn a manageable problem into a lost house if income stops.
What homeowners ask
HELOC or home equity loan — what is the difference?
A home equity loan hands you a lump sum at a fixed rate, like a second mortgage; a HELOC is a revolving line you draw on as needed, usually at a variable rate. Choose the fixed loan for a one-time cost you can size now (a roof, a consolidation), and the HELOC for staggered spending like a phased remodel.
How much can I borrow against my home?
Most lenders let your combined loan balances reach 80–85% of the home's value. On a $400,000 home with a $250,000 mortgage, an 85% ceiling leaves roughly $90,000 in tappable equity — before they weigh your income and credit.
Is the interest tax-deductible?
Only when the funds are used to buy, build, or substantially improve the home securing the loan, and only if you itemize. Borrow against the house to consolidate cards or pay tuition and the interest is not deductible, even though the loan is a mortgage.
What happens if I cannot repay?
Because the loan is secured by your home, default can end in foreclosure — the same consequence as missing your first mortgage. That is the whole trade: home equity carries the lowest rate on this page precisely because you are pledging the roof over your head.