* average is based on banks tracked on MyBankTracker.com.
A home equity loan, often called a “second mortgage,” allows you to finance major expenses, such home improvement projects, medical bills, education costs and more. Also, home equity loans are commonly used for debt consolidation.
Home equity loan rates tend to be much lower than most personal loans because home equity loans are secured by your home. Typically, you are not allowed to borrow more than 80 percent of your home’s fair market value.
However, there is a life-changing consequence if you struggle to repay a home equity loan. Defaulting on a home equity loan also means that you could lose your home.
Like any loan, many factors are used to determine the home equity loan rates offered to you.
Home equity loan rates vary depending on your creditworthiness, desired loan amount, your home’s value and the amount of equity owned by you.
To qualify for the lowest home equity loan rates, consider boosting your credit score and increasing the equity in your home. You’re more likely to obtain a lower home equity loan APR with a larger loan amount. But, you may also have a longer term, which means more interest paid over the life of the loan.
Some banks offers rate discounts on home equity loans if you also have other accounts with them.
The interest paid on a home equity loan may be tax deductible depending on how you use the borrowed funds.
You may deduct up to $1 million in interest if a home equity loan is used to improve your home, or to purchases a new home. If the borrowed funds are used for any other purpose, you may only deduct up to $100,000 in interest. Furthermore, you can’t deduct more than the value of your home.
The tax advantages of a home equity loan can also lead to a major financial pitfall. It may be tempting to use the money to pay for expensive purchases, which could result in a large amount of debt that puts your home in jeopardy.
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All Information is provided 'as is' and solely for informational purposes, not for advice, and may be delayed.