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 far apart, 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, September 7, 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 gap stems from how lenders price risk and interest rate structures. HELOC rates are variable and tied directly to the Prime Rate, meaning you carry the risk if interest rates fluctuate in the future. Because lenders aren’t locking in a rate for years, they can offer a lower initial APR. Conversely, fixed-rate Home Equity Loans require lenders to absorb long-term interest rate risk over a 10- to 20-year term, leading them to charge a slight premium (the 19-basis-point spread) for fixing your rate.
Not necessarily. HELOC interest rates are variable, which means they can adjust upward or downward based on decisions by the Federal Reserve and changes to the Prime Rate. If economic conditions cause benchmark interest rates to rise, your HELOC rate could quickly surpass the fixed rate of a standard home equity loan.
During the initial “draw period” (usually the first 5 to 10 years), a HELOC typically offers significantly lower required monthly payments because most lenders only require you to pay interest on the money you have actually drawn. Once the draw period ends, payments increase as you begin repaying principal. A Home Equity Loan requires fixed principal-and-interest payments from day one, which makes the early payments higher but predictable throughout the entire loan term.
For both HELOCs and Home Equity Loans, lenders typically evaluate your combined loan-to-value ratio (CLTV). Most lenders permit you to borrow up to 80% to 85% of your home’s appraised market value, minus your existing primary mortgage balance. Your actual rate and maximum limit will also depend on your credit score, income, and debt-to-income (DTI) ratio.
Under current IRS guidelines, the tax treatment is generally the same for both products. Interest paid on either a HELOC or a Home Equity Loan may be tax-deductible only if the funds are used to buy, build, or substantially improve the home that secures the loan. If you use the funds for other expenses—such as debt consolidation or college tuition—the interest is generally non-deductible regardless of which product you choose. Always consult a certified tax professional for your specific situation.
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
