Is a HELOC a good idea?

A HELOC can be a good idea if used for home improvement projects that increase the value of your home. Because a HELOC lets you take out what you need when you need it, it’s best for ongoing projects or expenses. A HELOC is not a good idea if you don't have a steady income or a financial plan to pay off the loan. Since you use your home as collateral, if you fail to make the payments in full and on time, you risk losing your home.

Are HELOC rates fixed?

Like credit cards, HELOCs typically have variable interest rates, meaning the rate you initially receive may rise or fall during your draw and repayment periods. However, some lenders have begun offering options to convert all or part of your variable-rate HELOC into a fixed-rate HELOC, sometimes for an additional fee.

Is a HELOC tax deductible?

Interest paid on a HELOC is tax deductible as long as it’s used to “buy, build or substantially improve the taxpayer’s home that secures the loan,” according to the IRS. Interest is capped at $750,000 on home loans (combined mortgage and HELOC or home equity loan). So if you had a $600,000 mortgage and a $300,000 HELOC for home improvements on a house worth $1.2 million, you could only deduct the interest on the first $750,000 of the $900,000 you borrowed. If you are using a HELOC for any purpose other than home improvement (such as starting a business or consolidating high-interest debt), you cannot deduct interest under the tax law. A good way to do this is by taking advantage of prequalification forms, which let you see your potential rates and eligibility with a lender without impacting your credit score.

Which is better: A HELOC or a home equity loan?

Choosing between a HELOC and a home equity loan comes down to your financial situation, needs and priorities. A HELOC usually has a longer repayment period and allows you to take only the money you need, when you need it, so it's best for people who have ongoing expenses or those who prefer to pay back debt at their own pace. A home equity loan, on the other hand, offers more predictability in terms of monthly payments, since you'll receive a large sum of money upfront and pay it back in monthly installments with a fixed interest rate. Home equity loans are usually best for people who need a lump sum right away and want a predictable monthly payment.

Will a HELOC hurt my credit score?

Due to the fact that HELOCs are revolving lines of credit, they can impact, and even hurt, your credit. When you apply, typically the lender will run a hard inquiry to assess your creditworthiness, and that can have a small impact on your credit score. While a hard inquiry may cause your credit score to drop a few points, you should be able to recover those points if you make timely payments on your HELOC balance. That said, a HELOC will more significantly hurt your credit score if you fail to make on-time payments or if you miss payments altogether. You also run the risk of losing your home, since a HELOC uses it as collateral. Minimum requirements generally include a credit score of 620 or higher, a maximum loan-to-value ratio of 80 percent or 85 percent and a documented source of income.

Are HELOC interest rates higher than home equity or personal loans?

HELOC interest rates tend to be lower than interest rates for home equity loans and personal loans. However, HELOC rates also tend to be variable, meaning that rates could increase depending on decisions from the Federal Reserve. As rates continue to rise, a HELOC with a variable interest rate might be a riskier proposition for some.

Can you pay off a HELOC early?

Depending on your lender, you can pay off a HELOC early without being penalized. If you’d like to prepay, try to do it within the interest-only period so you avoid paying more during the repayment time frame. However, some lenders do charge prepayment penalties that could cost up to a few hundred dollars.

Current home equity line of credit (HELOC) rates for January 2026

Written by

Linda Bell,

Edited by

Alice Holbrook,

Reviewed by

Mark Hamrick,

Expert verified

Updated on Jan 16, 2026

The national average HELOC interest rate is 7.44% as of Jan. 14, 2025, according to Bankrate’s latest survey of the nation’s largest home equity lenders.

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What are the current HELOC interest rates?

LOAN TYPE	AVERAGE RATE	AVERAGE RATE RANGE
HELOC	7.44%	4.74% - 11.74%

Average home equity line of credit (HELOC) rates

Bankrate’s National Average survey incorporates rate information from the 10 largest banks and thrifts in 10 large U.S. markets. Rates are calculated using a loan or credit line amount of $30,000, with a FICO score of 700 and a combined loan-to-value ratio of 80 percent for primary single-family detached homes.

Learn more: Understanding Bankrate’s rate averages

National HELOC interest rate trends - Jan. 14, 2026

HELOC rates plunge to lowest level in three years

There was a huge drop in HELOC rates this past week, as a major lender resumed promotional offers. The average rate for a $30,000 HELOC plummeted 78 basis points to 7.44%, its lowest level since 2022, according to Bankrate’s national survey of lenders.

Home equity lines of credit (HELOCs) have variable interest rates that fluctuate based on the prime rate, which, in turn, is tied to changes in the Fed's monetary policy. The central bank lowered interest rates three times in 2025, with quarter-point cuts in September, October and December. The Fed’s next policy-setting meeting is scheduled on January 27-28.

Even in a falling-rate environment, consumers should weigh potential rate scenarios when deciding to tap their home equity, says Carl Holubowich, a certified financial planner and principal at Armstrong, Fleming & Moore.

“I would budget thinking that rates may be staying the same, but also factor in an alternate scenario where, if interest rates are 50 basis points or a percentage higher, what does that do? It's a tool. It's not free money,” he says. “You're expected to pay [it] back, and you have to make sure that … [you] can still afford to make those monthly payments.”

Ask the Experts

Is now the right time to get a HELOC?

Chris Carter

Vice President, Sales Manager, Univest Home Loans

Now is an excellent time to secure a home equity line of credit. American homeowners possess record equity in their homes and most have the luxury of a low-rate primary mortgage they would like to remain intact. The HELOC allows for homeowners to leverage this equity for home improvement, debt consolidation, student loan financing, or other financial considerations without disturbing their existing mortgage.

Christopher Carter

Co-founder and CEO of Splitero

"Now is an excellent time to secure a home equity line of credit. American homeowners possess record equity in their homes and most have the luxury of a low-rate primary mortgage they would like to remain intact. The HELOC allows for homeowners to leverage this equity for home improvement, debt consolidation, student loan financing, or other financial considerations without disturbing their existing mortgage."

Ted Rossman

Senior Analyst, Bankrate

"I expect three quarter-point cuts from the Fed this year. That will push existing HELOC rates lower by the same amount. New offers for both HELOCs and home equity loans should drift downward, generally in line with that trend. It’s getting more attractive to use home equity for purposes such as home improvements and debt consolidation. It’s worth emphasizing that if you have good credit and shop around, you can already get rates in the 6's."

Best home equity line of credit (HELOC) rates in January 2026

LOAN TYPE	CREDIT LINE AMOUNT	TERM PERIOD	CURRENT APR
Rate	$20,000–$400,000	Up to 30 years	6.35%
Third Federal Savings	$10,000–$300,000	10-year draw, 30-year total repay period	6.24%
TD Bank	Starting at $25,000	10-year draw, 20-year repay	6.59%
FourLeaf Federal Credit Union	Up to $1 million	10-year draw, 20-year repay	6.75% (5.99%- 12-month intro rate)
BMO	Starting at $25,000	10-year draw/ 20-year repay for variable-rate HELOC; 5–20-year repay for fixed-rate HELOC	7.13% (fixed) / 7.34% (variable)
Connexus Credit Union	$10,000–$500,000	15-year draw, 15-year repay	7.94% standard HELOC / 8.44% interest-only HELOC
Comerica Bank	Starting at $10,000	30 years	7.75% (5.74% - 6-month intro rate)
Bank of America	$25,000-$1,000,000	10-year draw, 20-year repay	8.15% (5.24% - 6-month intro rate)

Note: The above APRs are current as of January 15, 2026. The exact APR you might qualify for depends on your credit score and other factors, such as whether you're an existing customer or enroll in auto-payments.

To determine this best HELOC rates list, we surveyed over 30 lenders offering home equity lines of credit. The top HELOC rates displayed here may be special introductory rates, and represent the lowest advertised APR (annual percentage rate) based on a borrower with a credit score of 700 or higher and a combined loan-to-value (CLTV) ratio of 80 percent obtaining a 30-year, $30,000 home equity line of credit.

Note that the lenders listed here are based solely on their offering the lowest APR, and are not necessarily the best overall HELOC lenders Bankrate has scored. Learn more about Bankrate’s lender review methodology.

Factors that determine your HELOC rate

Both your personal financial profile and economic trends play a role in the HELOC rate you'll ultimately receive. Factors include:

Federal Reserve policy: HELOC rates move in step with the prime rate, which is directly influenced by the Federal Reserve. If the Fed lowers its benchmark rate, the prime rate and HELOC rates also decrease, and vice versa.
Credit score: Your credit score signals how reliably you manage debt. Borrowers with higher scores are typically rewarded with lower HELOC interest rates.
Loan-to-value ratio: This is the amount you wish to borrow on your home versus your home’s value, expressed as a percentage. The lower the LTV, the less risk you pose to the lender — and the better your rate is likely to be.
Debt-to-income ratio: Lenders evaluate how much of your monthly income already goes toward debt payments. A lower DTI shows you can comfortably handle additional debt and may help you secure a more favorable rate.
Loan type, amount & property: Bigger loans or longer repayment periods can come with higher rates, simply because they present more risk for the lender. Pulling equity from a second home or investment property is also considered riskier than borrowing against your primary residence, so expect to pay more if you’re doing so.
The lender you choose: HELOC rates and terms can vary widely by lender, making it worthwhile to shop around. Many offer discounts to borrowers who already bank with them. Some lenders offer teaser rates on HELOCs, an especially low interest rate for a set time period.
Rate structure and margin: HELOCs usually have a variable rate based on the prime rate plus a lender-set margin. While the rate may rise and fall over time, the margin typically remains fixed for the life of the loan.

How to get the best HELOC rate

If you’re interested in a HELOC, it pays to prepare your finances and shop around. Rates and terms can vary more than you’d think.

Confirm your eligibility: Make sure you meet lenders’ basic requirements for HELOCs. That usually means a good credit score (680 was historically the standard, but 620 is a more common minimum nowadays), a solid and steady income, and at least a 15 to 20 percent equity stake in your home.
Strengthen your financial profile: Qualifying is one thing, but you’ll get a better rate if you exceed the minimum requirements. Boost your credit score by paying down or paying off credit cards and other existing loans. Making extra mortgage payments allocated to your principal can also help build equity.
Compare at least three lenders: And don’t just look at the HELOC interest rate. You’ll also want to scrutinize the annual percentage rate, or APR, of each loan. This includes the interest rate and some fees, making it a better measure of the total loan cost.
Time your application: Variable HELOC rates can fluctuate along with the economy. If possible, apply when rates are lower or stable, especially if you’re planning a large draw.
Read the fine print: Check for hidden fees, prepayment penalties, and confusing terms. Note the minimum and maximum rates you can be charged and under what circumstances, if any, the lender can freeze or lower your credit line.
Watch for promotional or introductory rates: Many lenders offer teaser or introductory rates that are lower than the standard variable rate for a set period, often six months to a year. After the promotional period ends, your rate may jump, which would increase your monthly payments.

Pros and cons of HELOCs

HELOCs combine relatively low interest rates with the flexibility to borrow what you need when you need it. If you need money over an unpredictable period of time, a line of credit is ideal. However, there are always risks when you take out a loan, especially one that's secured by your home. Here are some of the pros and cons of a HELOC.

Pros of HELOCs

Lets you tap home equity without disturbing the primary mortgage (especially helpful if you’ve locked in a low rate)
Typically lower upfront costs than home equity loans
Lower interest rates than with credit cards
Usually low or no closing costs
Interest charged only on the amount of money you use

Cons of HELOCs

Lenders may require minimum draws.
Interest rates can adjust upward or downward.
Lenders may charge a variety of fees, including annual fees, application fees, cancellation fees or early closure fees.
Late or missed payments can damage your credit and put your home at risk.
Flexible access to funds may encourage overspending and increase debt.

Alternatives to a HELOC

A HELOC is not the right choice for every borrower. Depending on why you need the money, one of these alternative options may be a better fit:

Home equity loan: Functions like a second mortgage. You get a lump sum upfront and repay it at a fixed interest rate over time. Best if you prefer predictable payments.
Cash-out refinance: Replaces your existing mortgage with a bigger one, giving you the difference in a cash payout.
Reverse mortgage: Designed for older homeowners, this lets you tap your home equity, either in installments or a lump sum, without monthly repayments. You repay the loan only when you move out, sell the home, or pass away.
Personal loan: Like a home equity loan, has a fixed interest rate and disburses money in a lump sum. Tends to have shorter terms and higher interest rates than home equity financing.
Credit cards: While convenient, credit cards usually carry much higher interest rates than HELOCs. Useful for smaller, short-term expenses or emergencies.

Next steps to getting a HELOC

Before you start applying for a HELOC, here are some home equity resources to prepare you for the process:

What is home equity?

Discover what home equity means and how you can tap it to pay for home renovations or pay off debts, and how to get the best rates.

How to calculate your home equity

Follow these steps to calculate how much equity you have in your home and how to tap into it via a home equity loan or line of credit (HELOC).

HELOC and home equity loan requirements

Everything you need to know about HELOC and home equity loan requirements: credit scores, DTI ratios and more.

How to shop for a HELOC: 10 ways to get the best HELOC rate

Tips that'll help you save money in the long-term by scoring the best possible rate on your home equity line of credit (HELOC).

FAQs about home equity lines of credit

A HELOC, or home equity line of credit, works like a big credit card. You get a revolving line of credit you can borrow from as needed, usually with a variable interest rate, for a set time period. After that, you repay the withdrawn funds, plus interest, over several more years. Your home serves as collateral for the HELOC, and you risk losing it if you miss payments.
The amount you can borrow depends on how much equity you have in your home. Typically, lenders allow you to borrow up to 80% of your home’s value, minus what you owe on your mortgage. Some lenders go as high as 85% to 90%.
When you’re shopping for a lender, you should consider a variety of factors. Do the lender’s requirements around loan-to-value and credit score fit your financial profile? Do you prefer doing business with a brick-and-mortar lender or an online company? What are the policies concerning prepayment, refinancing and adjusting the credit line limit? You should research the company’s consumer reviews, then compare its rates, terms and fees to find the best overall value.

Read our Reviews: Home Equity Lender Reviews
Like credit cards, HELOCs typically have variable interest rates, meaning the rate you initially receive may rise or fall during your draw and repayment periods. However, some lenders offer fixed-rate HELOCs or allow you to convert all or part of your HELOC from a variable rate into a fixed one, sometimes for an additional fee.
Interest paid on a HELOC is tax deductible as long as it’s used to “buy, build or substantially improve the taxpayer’s home that secures the loan,” according to the IRS. However, you can only deduct interest on the first $750,000 of home loan debt. That is, if you have a $600,000 mortgage and a $300,000 HELOC for home improvements, you could deduct only the interest on the first $750,000 of the $900,000 you borrowed.

If you are using a HELOC for any purpose other than home improvement (such as starting a business or consolidating high-interest debt), you cannot deduct interest under the tax law.

Meet our Bankrate experts

Written by: Linda Bell, Senior Writer, Home Lending

For more than two decades, I have covered the housing market, including in depth coverage of the 2008 housing market collapse. To increase my knowledge of home equity and HELOCs, I earned a Certified HELOC Specialist designation from the National Association of Mortgage Underwriters (NAMU). Throughout my career, I have won more than two dozen awards, most notably from the National Association of Real Estate Editors (NAREE) and the New York Association of Black Journalists (NYABJ) for an investigative series I produced on minorities and the housing industry.