The difference between the current home equity loan (HEL) rate and the average HELOC rate is 19 basis points, according to Curinos, a real estate data analytics company. When rates are this close, choosing the right option isn’t just about which rate is lower. How you plan to use your funds will determine the loan product that is best for you.
HELOC and home equity loan rates: Monday, August 31, 2026
The average HELOC adjustable rate is 7.16%, a new 2026 low, according to real estate data analytics company Curinos.
The national average rate on a fixed-rate home equity loan is 7.35%, up slightly from its 2026 low of 7.31% in late June.
Both rates are based on applicants with a minimum credit score of 780 and a maximum combined loan-to-value ratio (CLTV) of less than 70%.
How do HELOC interest rates work?
Most HELOCs are variable-rate products, meaning their interest rates are tied to an external interest rate. When that rate rises or falls, the rate on your HELOC generally follows suit.
HELOCs are typically tied to the prime rate, the baseline rate banks currently charge their most creditworthy customers.
The best HELOC lenders will assess the risk any borrower presents and add a margin to protect themselves. Riskier borrowers will have larger margins, while those considered less risky will receive smaller ones. Factors such as your credit score, debt-to-income ratio (DTI), and loan-to-value ratio (LTV) will all be considered in this assessment.
How do home equity loan interest rates work?
A home equity loan and its interest rate work like a HELOC in some ways and like a traditional primary mortgage in others.
As with a HELOC, the prime rate usually impacts your home equity loan rates, and home equity loan lenders incorporate a margin into your rate. Both HELOC and home equity loan rates are loosely influenced by the Federal Reserve’s federal funds rate and broader economic conditions.
However, like many first mortgages, home equity loans are typically fixed-rate products, meaning you’ll have the same interest rate for the entire term. Fixed-rate HELOCs exist, but they’re much less common.
How to qualify for a HELOC or home equity loan
Specific loan requirements vary by lender, but generally, home equity loans and HELOCs require a borrower to:
- Have a FICO credit score of 680 or higher
- Show a history of good credit and proof of sufficient monthly income
- Obtain an appraisal to determine the current market value of the home
- Have at least 15% to 20% equity in the house
- Have a debt-to-income ratio of 43% or less
- Show proof of in-force homeowners insurance
Lenders may charge origination fees and other closing costs on a HELOC or home equity loan. When shopping for yours, make sure to ask about all possible application fees, annual charges, early account closure fees, and other one-time or ongoing expenses. Shop multiple lenders to find the lowest interest rate and the fewest fees.
The core difference comes down to how you receive the money and how interest is charged:
Home Equity Loan (HEL): Distributes a lump sum of cash upfront with a fixed interest rate and fixed monthly payments over the entire loan term.
Home Equity Line of Credit (HELOC): Functions like a revolving credit card with a variable interest rate. You draw funds as needed up to a credit limit during the initial draw period and only pay interest on what you use.
When rates are virtually equal (e.g., 7.35% for a loan vs. 7.16% for a line of credit), your intended use of funds matters most:
Choose a Home Equity Loan if you need a specific dollar amount all at once (such as a major roof repair or debt consolidation) and want predictable monthly payments.
Choose a HELOC if you have recurring, unpredictable expenses over time (like a phased home renovation) or anticipate that overall interest rates might drop in the future.
Most lenders require a minimum FICO credit score of 680 to qualify for either product. However, the lowest advertised rates (like the national averages of 7.16% and 7.35%) are typically reserved for borrowers with top-tier credit scores of 780 or higher.
Lenders generally require you to retain at least 15% to 20% equity in your home after accounting for all loans. Additionally, most lenders set a maximum Combined Loan-to-Value (CLTV) ratio cap of 80% to 85% across your primary mortgage and your new equity loan combined.
Beyond the interest rate, lenders may charge up to several hundred or thousand dollars in additional fees. Always ask about:
Application and origination fees
Mandatory professional home appraisal costs
Closing costs
Annual maintenance or membership fees (common with HELOCs)
Early account closure or prepayment penalties
Manoj Sharma is a Senior Writer on the banking team at Tax Assistant. He provides information on budgeting, bank accounts, the banking industry, and other related topics. Using original data and methodologies, he helps you identify the best financial institutions, accounts, and products tailored to your needs. Manoj holds a degree in Journalism and Political Science from Syracuse University. All articles are strictly reviewed and fact-checked by our panel of expert Chartered Accountants, including CA Devendra Saini, CA Nikhil Khunteta, and CA Ankit Goyal
