Home equity loans

A home equity loan pays you one lump sum against your equity, at a fixed rate, with the same payment every month until it's paid off.

Reviewed by Shawn Way, NMLS #1007298★ 4.9 from 111 reviewsUpdated October 28, 2026

How it works

• Amount: home value × the lender's cap (often 80%–85%) − your mortgage balance.
• Rate: fixed at closing, usually a bit above a HELOC's starting rate in exchange for certainty.
• Payment: principal and interest from the first month. No draw period, no payment jump.
• Closing: similar costs to a HELOC; a 3-business-day right to cancel on your primary home.

Should I get a home equity loan or a HELOC?

A home equity loan is better if you'll use all the money on day one, since its fixed rate protects you from rate rises. A HELOC is better if you'll spend over time, because it charges interest only on what you draw. Full comparison.

Payments

See the home equity loan calculator or payments by amount.

Example payments

On $75,000 at an example fixed 8.25% interest rate:

See every amount and term in the payment tables or the calculator.

Qualifying

Requirements are similar to a HELOC: combined loan-to-value usually up to 80%–90%, a credit score in the mid-600s or higher, and debt-to-income under about 43%–50%. Because the payment is fixed, lenders qualify you on the actual payment rather than an estimate.

Costs

Closing costs commonly run 1%–5% of the loan, though some lenders cover them. Ask about prepayment penalties; most home equity loans have none, but some charge a fee if you pay off within the first few years.

Best uses

• Paying off a fixed amount of debt with a firm end date. HELOC or home equity loan for debt.
• A single project with a signed price, like a roof or windows.
• A divorce buyout or a payment to an heir.

Checklist

• Know the exact amount you need.
• Compare APRs across terms.
• Ask about prepayment penalties and origination fees.
• Confirm the payment fits if your other expenses rise.

Example: a divorce buyout

A homeowner needs $90,000 to buy out an ex-spouse while keeping a 3% first mortgage. A 15-year home equity loan gives a fixed payment and a firm payoff date, and the amount is known on day one. It's the textbook use for a home equity loan.

Related question: HELOC vs. home equity loan vs. cash-out refinance

Also asked

Is a home equity loan the same as a second mortgage?

Yes, when there's a first mortgage ahead of it. On a home with no mortgage, it's in first position.

Can I get a home equity loan with a 640 credit score?

Yes, some lenders make home equity loans in the 640s, usually with more equity required and a higher rate. Scores of 680 to 700 and up open more options.

Can I pay it off early?

Most have no prepayment penalty, but some charge one in the first few years. Ask before signing.

How much can I borrow with a home equity loan?

A home equity loan usually lets your mortgage plus the new loan reach 80% to 90% of your home's value. Your income also limits the amount, with debt-to-income usually under about 43%–50%.

Can I use a home equity loan for anything?

Yes, you can use a home equity loan for anything, since the lender doesn't restrict use. The interest is deductible only when the money buys, builds or substantially improves the home.

Is home equity loan interest tax-deductible?

Sometimes. Home equity loan interest can be deductible if you itemize and use the money to buy, build or substantially improve the home securing the loan, within the limit of $750,000 of total mortgage debt. Interest on money used for debts, cars or other purposes isn't deductible.

More in loan programs

• HELOCs with Shawn Way
• Third-lien home equity loans
• Home equity agreements (HEI)
• Texas 50(a)(6) cash-out refinance
• Bridge loans
• Cash offer programs
• Equity with a credit score under 580
• No income or employment verification
• Blanket and cross-collateral loans

All loan programs →