HELOC and Home Equity Loan Rates Steady in Mid-7% Range, Offering Alternative to Refinancing

The cost of tapping home equity through a second mortgage remains largely unchanged, with nationwide averages for home equity lines of credit (HELOCs) and home equity loans (HELs) still lodged in the mid-7% band. On Sunday, January 25, 2026, real-estate analytics firm Curinos reported an average HELOC rate of 7.25% and an average home equity loan rate of 7.56% for applicants meeting top-tier criteria: a minimum credit score of 780 and a combined loan-to-value (CLTV) ratio below 70%.

Why borrowers are turning to second mortgages

Persistently high first-mortgage rates have left many homeowners reluctant to refinance away from the lower rates secured in earlier years. Instead, owners with substantial equity are increasingly evaluating second-lien products—HELOCs and HELs—as tools for funding renovations, consolidating higher-interest debt, or covering major expenses without disturbing their primary mortgage terms.

The potential market is sizable. Federal Reserve data show that U.S. homeowners collectively hold roughly $34 trillion in home equity, a record level driven by years of rising property values and steady principal paydowns. Second mortgages give borrowers a way to convert a portion of that locked-in value into cash while retaining existing first-lien rates.

Rate mechanics: Index plus margin

Unlike first mortgages, second-lien products generally price off a consumer lending benchmark such as the prime rate, which currently stands at 6.75%. Lenders then add a margin—often around 0.50% to 1.50%—based on creditworthiness, CLTV, and overall risk. Under that structure, a borrower receiving a 0.75% margin would see a HELOC rate of 7.50%.

Because pricing flexibility is greater on second mortgages, terms vary widely from one institution to the next. Industry surveys indicate advertised rates range from just under 6% for highly qualified borrowers to approximately 18% for applicants with weaker profiles. As a result, comparison shopping remains critical.

HELOC specifics

A HELOC functions like a revolving account secured by real estate. Borrowers draw only what they need, repay the balance, and draw again—typically during a 10-year draw period that shifts into a 20-year repayment period. Most HELOCs carry variable rates that reset monthly or quarterly, mirroring changes in the underlying index.

Promotional or “introductory” rates are common. A lender may advertise a below-market rate for the first six to twelve months, after which the rate reverts to the fully indexed level. While the teaser can lower initial costs, borrowers need to evaluate affordability once the promotional window closes.

To illustrate potential expenses, a homeowner withdrawing the full $50,000 from a HELOC at 7.50% would pay roughly $313 per month during the draw phase. Payments are interest-only at that stage, meaning the principal remains intact until the draw period ends. When amortization begins, both the rate and the payment amount can increase, extending total repayment across a 30-year horizon if the line is not curtailed sooner.

Home equity loans at a glance

A HEL differs primarily in structure: funds are disbursed as a lump sum, the rate is fixed, and amortization starts immediately. Because there are no draw minimums or subsequent draws, budgeting can be more straightforward. Borrowers lock in one payment schedule and avoid the uncertainty of rate resets—an attractive feature when planning long-term projects or debt consolidation.

Fixed-rate certainty, however, can come with trade-offs. Up-front closing costs may be higher than those found on many HELOCs, and borrowers who need flexibility to access varying amounts over time must apply for a new loan or refinance the existing HEL if circumstances change.

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Current market snapshot

• Average HELOC rate: 7.25%
• Average home equity loan rate: 7.56%
• Prime rate: 6.75%
• Typical promotional HELOC rate range: Below 6% to mid-7%
• Potential overall rate range across lenders: ~6% to 18%

Pricing is not uniform. For example, LendingTree on January 25 quoted a 6.36% annual percentage rate on a $150,000 HELOC to well-qualified borrowers, underscoring the importance of evaluating multiple offers.

Key qualification factors

While each lender imposes its own underwriting guidelines, several core metrics determine eligibility and price:

• Credit score: A score of 780 or higher places borrowers in the top tier for the lowest advertised rates. Lower scores will generally increase the margin and, by extension, the rate.
• Combined loan-to-value (CLTV): Lenders usually cap CLTV at 85%, though many reserve their best pricing for ratios at or under 70%. The CLTV compares the sum of all mortgage balances—including the proposed HELOC or HEL—to the home’s appraised value.
• Debt-to-income (DTI) ratio: Even with significant equity, lenders scrutinize monthly obligations. A lower DTI can translate to more favorable terms.
• Employment and income stability: Proof of consistent earnings remains a baseline requirement.

Cost considerations beyond interest

Second mortgages often feature fewer closing costs than first-lien refinances, yet fees still vary. Borrowers should review application charges, origination fees, annual maintenance fees (for HELOCs), and potential early closure penalties. Some lenders waive certain costs in promotional periods, but conditions—such as maintaining the line for a minimum term—commonly apply.

Assessing variable-rate risk

The principal distinction between a HELOC and a fixed-rate HEL involves rate stability. While the average HELOC rate remains lower at origination, it is not locked for the term. If the prime rate rises, HELOC payments can escalate significantly. Borrowers should model payment scenarios at various rate increments and confirm their ability to service the debt under less favorable conditions.

When a second mortgage makes sense

A HELOC or HEL can be beneficial under specific circumstances:

• Low first-mortgage rate: Homeowners insulated from today’s higher first-lien rates may prefer to keep that loan intact.
• Large equity cushion: Ample equity increases approval odds and lowers risk, contributing to better rate offers.
• Defined purpose and repayment plan: Whether funding a remodel or consolidating high-interest credit cards, a clear payoff strategy helps minimize interest expense.

Alternatives to consider

Cash-out refinancing might still be worthwhile for borrowers whose first-mortgage rate is close to prevailing levels or who require a single, fixed payment. Personal loans, while unsecured and often carrying higher rates, avoid using the home as collateral. Each option involves trade-offs that borrowers should weigh against budget constraints and risk tolerance.

Steps before applying

1. Check credit reports for accuracy and correct errors.
2. Calculate current CLTV by combining outstanding mortgage balances and estimating market value.
3. Gather documentation: pay stubs, W-2s, tax returns, property tax statements, and homeowners insurance declarations.
4. Solicit quotes from multiple lenders, comparing not just rate but also fee structure and repayment flexibility.
5. Review promotional terms carefully, noting when introductory rates expire.

With average HELOC and HEL rates holding near 7%, many homeowners can leverage their equity without sacrificing favorable first-mortgage terms. As always, disciplined borrowing and diligent shopping are central to maximizing the benefits of a second mortgage while mitigating the risks associated with variable rates and extended repayment timelines.

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