NEW YORK – July 31, 2025 – Homeowners can tap into their equity for borrowing needs, as home equity loan and HELOC rates hover significantly lower than alternatives like personal loans and credit cards. With personal loan rates stuck around 12% and credit card rates recently falling from a peak of 23%, borrowing costs for these options remain high. Home equity options, however, offer a more attractive solution, especially as interest rates are expected to decline further later in 2025.
Homeowners can leverage their home equity with loans and HELOCs, benefiting from lower interest rates compared to other borrowing methods.
- Home equity loan rates range from 8.25% to 8.41% as of July 31, 2025.
- The average HELOC rate is 8.26%.
- Both options offer lower rates than personal loans (around 12%) and credit cards (recently at 23%).
- Interest paid on home equity products used for IRS-eligible renovations may be tax-deductible.
- Home equity loans provide a lump sum with fixed rates, while HELOCs offer a revolving credit line with variable rates.
Today’s Home Equity Borrowing Rates Revealed
As of July 31, 2025, the landscape for home equity borrowing looks promising for homeowners. According to data, average rates for home equity loans are as follows:
- 5-year home equity loans: 8.25%
- 10-year home equity loans: 8.41%
- 15-year home equity loans: 8.34%
The average rate for a home equity line of credit (HELOC) stands at 8.26%. These figures represent nationwide averages, and individual offers can vary based on location, lender, and your creditworthiness. It’s always wise to shop around for the best terms.
How much home equity could you borrow? Explore your options today.
Understanding HELOCs vs. Home Equity Loans
Both home equity loans and HELOCs utilize your home’s equity for funding, but they operate differently.
Home Equity Loans
These loans provide a lump sum of cash. You’ll typically have a fixed interest rate, and repayment begins immediately. This predictable structure makes budgeting easier.
Home Equity Lines of Credit (HELOCs)
A HELOC functions more like a credit card. You get a revolving line of credit against your home equity. You only pay interest on the amount you draw, not the total approved credit line. During an initial draw period, usually 10 to 15 years, you might make interest-only payments. Following this, a repayment period begins.
Key Differences at a Glance:
Home Equity Loan: Lump sum, fixed rate, immediate repayment.
HELOC: Revolving credit line, variable rate, interest-only payments possible initially.
Potential Tax Advantages and Risks
Beyond competitive interest rates, both HELOCs and home equity loans can offer tax benefits. If the funds are used for IRS-eligible home repairs or renovations, you may be able to deduct the interest paid. This can provide significant savings over the life of the loan.
However, it’s crucial to remember that your home serves as collateral for these loans. Failure to make payments as agreed could lead to foreclosure. Therefore, carefully assessing your budget and financial needs before committing is essential.
The Smart Choice for Borrowing
In the current financial climate, leveraging your home equity through a HELOC or home equity loan presents a financially savvy move. Rates are more favorable than many alternatives and are expected to fall further with potential Federal Reserve rate cuts. Remember, diligent comparison shopping among lenders is key to securing the best rates and terms for your financial goals.
