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Forbes
21 hours ago
- Business
- Forbes
Today's HELOC & Home Equity Loan Rates: June 27, 2025
Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations. Home equity loans and home equity lines of credit (HELOCs) allow homeowners to tap into the value of their homes. A home equity loan is a fixed-rate, lump-sum loan that allows homeowners to borrow up to 85% of their home's value and pay that amount back in monthly installments. A home equity line of credit is a variable-rate second mortgage that draws on your home's value as a revolving line of credit. Both options use your property as collateral for your payments, which means your lender can seize your property if you can't repay what you borrow. $100K HELOC Loan Rates Ideal for Medium-Sized Projects A $100K HELOC is suitable for more extensive renovation projects or other significant financial needs. Compare the rates and terms to find the best fit for your situation. $250K HELOC Loan Rates Access More Funds for Major Investments For larger projects or investments, a $250K HELOC provides the necessary funds with various LTV options. Explore these rates to determine the right balance between borrowing capacity and risk. $500K HELOC Loan Rates Maximize Your Borrowing Power If you have substantial equity in your home and need significant financing, a $500K HELOC offers a great deal of borrowing power. Evaluate these options to find the optimal rate and term for your goals. Pros and Cons of a HELOC PROS CONS You can expect an average interest rate that's lower than other loan types You can expect variable interest rates that change over time, which may make it difficult to manage your payments HELOCs let you access your funds as needed compared to a traditional loan that's paid as a lump sum Lenders use your property as collateral, which means you can lose your home if you default on your loan Interest payments may be tax deductible if you meet IRS guidelines and prove that you will use the funds to buy, improve or build a home HELOCs charge several loan fees that usually equal 2% to 6% of your overall loan amount fees HELOCs can be an excellent option to consolidate your other debt payments into one monthly payment and boost your credit score If the property value drops, you can owe more on your HELOC than your home is worth See More See Less 5-Year Home Equity Loan Rates (60 Months) A 5-year term offers a shorter repayment period with typically higher monthly payments. These products are suitable for borrowers looking for a quicker payoff. 10-Year Home Equity Loan Rates (120 Months) With a 10-year term, borrowers can enjoy a balanced monthly payment while still building equity quickly. 10-year home equity loans are ideal for medium-sized projects or financial needs. 15-Year Home Equity Loan Rates (180 Months) A 15-year term provides lower monthly payments compared to shorter terms, offering more affordability while still progressing toward your financial goals. 20-Year Home Equity Loan Rates (240 Months) Offering longer repayment and lower monthly payments, 20-year home equity loans are suitable for larger investments and long-term financial planning. 30-Year Home Equity Loan Rates (360 Months) The 30-year term maximizes affordability with the lowest monthly payments. These options are best for substantial borrowing needs and long-term investments. Pros and Cons of a Home Equity Loan PROS CONS You'll pay a fixed interest rate that remains consistent during your loan term You put your property at risk of foreclosure since your home secures your loan against defaulted payments If you have a big one-off expense or an investment opportunity, home equity loans distribute funds in lump-sum payments, unlike a credit card or a HELOC Home equity loans have strict requirements that can make them difficult to qualify for Home equity loans are unrestricted, meaning you can use them for almost any expense, including home renovations or auto repairs Home equity loan lenders tend to charge expensive fees that include origination fees, appraisal fees and closing costs Interest paid on your home equity loan might be tax-deductible if you itemize your deductions If your home's value decreases over time, you could end up with a loan balance that's higher than your property's value See More See Less What Is Home Equity? Home equity represents how much you own of your home compared to what the bank or mortgage lender owns. If you've paid off your home in full, you have 100% equity. You can utilize your home's equity without paying off your home in full, whether through a home equity loan or a home equity line of credit (HELOC). You can use your home's equity for home improvements, repairs, debt consolidation and educational costs, among other things. Why Is Home Equity Important? Home equity is important because it signifies how much wealth you have based on how much of your home you own. The more equity you have, the more wealth you've accumulated. If you ever need to utilize your home equity, you can tap into it with a home equity loan or home equity line of credit. You might also want to explore a cash-out refinance as an option to use your home's equity. What Is a HELOC? A home equity line of credit, often referred to as a HELOC, lets homeowners convert the equity in a residential property into cash through a revolving line of credit that's secured by your home. When you get a HELOC, you can take the money available in installments as you need it and pay interest only on what you use.
Yahoo
a day ago
- Business
- Yahoo
Pros and cons of a cash-out refinance
A cash-out refinance offers benefits like access to money at potentially a lower interest rate, plus tax deductions if you itemize. On the downside, a cash-out refinance increases your debt burden and depletes your equity. It could also mean you're paying your mortgage for longer. If you don't want to replace your entire mortgage with a new loan, you might also consider using a home equity loan or line of credit (HELOC). What is a cash-out refinance? A cash-out refinance replaces your existing mortgage with a new loan for a larger amount. The new loan pays off your original mortgage and provides additional cash in a lump sum that can be used for any purpose. These additional funds are based on your home's equity. Pros Cons You can access a sizable amount of money. You owe more money. You may be able to lower your interest rate. You're putting your home up as collateral. Your payments won't change. You have to pay closing costs. You could benefit from tax deductions. You could be tempted to borrow more for the wrong reasons. The biggest upside of a cash-out refinance is that you can get a considerable amount of money by unlocking home equity you already have — often much more than you could get with a credit card or personal loan. In fact, if you have a major expense, a cash-out refi might be one of the few ways you're able to pay for it. If mortgage rates are lower now than they were when you first got your mortgage, your new cash-out mortgage could come with a lower interest rate, depending on your credit score and other factors. Even if rates are higher now, you'll likely still get a lower rate doing a cash-out refi compared to getting a credit card or personal loan. Compare: Current cash-out refinance rates If you had a fixed-rate mortgage and refinance to a new fixed-rate mortgage, even with cash out, your monthly mortgage payments won't change. That's not the case with credit cards and home equity lines of credit (HELOCs), which generally carry variable rates. These predictable payments can make it easier to manage your budget over the long term and eliminate the stress of a fluctuating rate and payment. In addition, each time you make an on-time payment on your cash-out refi loan, you're doing your credit report a favor: On-time payments demonstrate strong personal finance habits that can help boost your credit score over time. If you itemize your tax deductions, you could take advantage of the mortgage interest deduction with the new loan — and potentially even more so if you use the cashed-out funds to buy, build or improve a home. Because you're taking out a larger loan amount — the remaining balance on the original mortgage plus cash out — your overall debt load will increase. A larger loan might also increase your monthly payments, depending on what rate you get and whether you refinance to a shorter or longer loan term. As with your original mortgage, your home is the collateral for a cash-out refinance, so if you don't repay the loan, you could lose your home. Just as you paid closing costs on your original mortgage, you'll pay similar expenses when you refinance. The good news: Refinance fees aren't nearly as expensive as the closing costs on a home purchase. However, they're usually costlier than the fees associated with a HELOC or home equity loan. If you're cashing out to pay off a mountain of high-interest credit card debt, take a long pause. Make sure you've addressed whatever spending issues led you to run up the debt in the first place. Otherwise, you might find yourself in a spiral and ultimately end up worse off than before. If you're considering a cash-out refinance, ask yourself these key questions to help decide if it's right for you: Can you get a lower interest rate? A cash-out refinance could be ideal if you qualify for a better interest rate than you currently have and plan to use the funds to improve your finances or your property. If you can't get a lower interest rate, however, a cash-out refinance might not be the best move, especially if you refinance to a new 30-year loan. What are you planning to do with the money from the cash-out? Investing in upgrades to your property with the money increases its value and makes it more enjoyable for you, making this a good reason to do a cash-out refi. You might also plan to use the funds to help pay off other high-interest debt. How long are you planning to stay in the home? With any refinance, you need to make sure you will be able to hit the break-even point that justifies the upfront investment of closing costs. If you expect to sell your home in the short term, it might not make sense to do a cash-out refinance; you'll have to repay the larger balance at closing. Aside from a cash-out refinance, other options that allow you to borrow against your home's equity include: HELOC: A home equity line of credit (HELOC) is a revolving credit line that functions much like a credit card. With a HELOC, you can borrow what you need, repay the amount borrowed and then borrow again. HELOCs come with a specific draw period during which you can continue to borrow funds as needed. Once the draw period closes, you pay back the remaining balance in installments. Home equity loan: Home equity loans provide a lump sum payment similar to a cash-out refinance. You pay back the funds in installments, usually at a fixed interest rate that's lower than many other types of consumer lending options. Both options are often quicker and less expensive to get than a cash-out refi. However, they also use your home as collateral and could come with higher interest rates compared to refinancing. How long does it take to close a cash-out refinance? Closing on a cash-out refinance typically takes 30 to 60 days. Ask your lender for its average closing time to get a sense of what to expect. Keep in mind you won't get the cashed-out funds for at least three business days after closing. This is required by law. What are the requirements for cash-out refinancing? The requirements for a cash-out refinance vary by lender, but most lenders will want to see a minimum credit score of 620 and a debt-to-income (DTI) ratio of no more than 43 percent. Some lenders set higher standards, however. Discover, for example, requires a minimum credit score of 680. In addition, lenders require you to have had your original mortgage for at least six months. Does cash-out refinancing hurt your credit? A refinance can affect your credit score for up to one year, but the impact is usually minimal. Sign in to access your portfolio
Yahoo
2 days ago
- Business
- Yahoo
Can you use home equity to buy another house?
You can use home equity to buy another house if you have enough of an ownership stake in your residence and meet other eligibility requirements. The most common ways to tap your equity are via a home equity loan or home equity line of credit (HELOC). Purchasing property with home equity can be cost-effective and make you a more competitive buyer. But it comes with certain risks and downsides: trading assets for debts, losing tax deductions, and risking your home if you miss payments. For homeowners, home equity is an incredibly valuable asset – so valuable, in fact, that they can even tap it to buy a second home, either outright or in part. Depending on the size of their ownership stake, they can access as much as $1 million via a home equity loan or home equity line of credit (HELOC). Can you use home equity to buy another residence? Sure, if you have enough equity and meet the eligibility requirements. But perhaps a better question is: Should you use a HELOC or home equity loan to buy a second home? While often convenient and cost-effective, it also comes with certain risks. Let's explore how this financing method works, including its pros, cons and alternatives. If you'd like to tap your home equity to purchase a second home, you've got several options. The two most common are a home equity loan and a HELOC. While there are similarities between these two products (for example, they're both second mortgages that require you to put your house up as collateral), there are also important differences. Here's how each one works. Characteristics Home equity loans HELOCs Distribution of funds In one lump sum. In a line of credit (like a credit card), so you can withdraw it gradually. Interest rate Fixed interest rate over the lifetime of the loan. Variable interest rate that rises or falls based on the prime rate. Amount you can borrow 80-85% of equity stake. 80-95% of equity stake. Loan repayment Immediately begin paying both principal and interest in monthly installments over the term, which can be up to 30 years. Draw period (the first 5–10 years): Option to only pay interest on what you've period (next 10–20 years): Pay back the principal and additional interest. Not sure whether you should use your equity to purchase a second home? Here are the advantages and the drawbacks. You won't have to touch your savings. By taking out a home equity loan or HELOC, you can get the cash you need to buy another home, without depleting your bank or investment account. You can keep your current home/mortgage. You don't need to sell or rent out your house to get funds for another home purchase and can leave your low-interest-rate mortgage, if you have one, untouched. You'll be a more competitive buyer. With the funds from your home equity loan, you can make a larger down payment on a new home — or even buy it outright. (See 'Using home equity for down payments' below.) That could make you more attractive to sellers. You can potentially borrow at a lower cost. Home equity loans and HELOCs are secured by your property. As a result, they tend to have lower interest rates than unsecured loans, like personal loans. Your exact interest rate will depend on your financial profile and lender, of course. You'll have a long time to repay. Home equity loans and HELOCs generally have long repayment periods, often up to 30 years. You could lose your home. Your primary residence serves as collateral for your home equity loan or HELOC. If you can't repay it, your lender could take your house. You're trading in hard-earned equity for more debt. In addition to your existing mortgage, you'll also be responsible for the home equity loan or HELOC, as well as any mortgage on your new property. That's a lot of debt to deal with, especially if you're one of the 73 percent of Americans in Bankrate's Emergency Savings Report who say they're saving less for unexpected expenses these days due to inflation/rising prices, elevated interest rates or a change in income/unemployment. Or the collective 43 percent who say they'd have to pay for an emergency by borrowing money in some form: either with a credit card (25 percent), from family or friends (13 percent), or via a personal loan 95 percent). You might end up underwater. If you give up a big chunk of your equity and property values decline, you could end up owing more on your home than it's worth (especially if you have multiple home-secured loans). As a result, you'd go into negative equity – otherwise known as being underwater on your mortgage. You're on the hook for closing costs. Like primary mortgages, home equity loans and HELOCs come with closing costs. On average, these costs range from 2 to 5 percent of your total loan amount; sometimes, they're closer to 1 percent. Still, it's an additional expense. You might pay more interest. While cheaper than unsecured debt, second mortgages carry higher interest rates than primary mortgages and refinances. You will probably also lose some tax advantages (see below). If the use is for a second home, you might lose out on one fundamental plus of home equity financing: the ability to deduct the loan interest come tax time. The IRS stipulates that for the interest to be deductible, the loan must be used to buy, build or substantially improve the residence that secures the loan. So, if you use your primary residence as collateral for an HE Loan or HELOC, and then put the money to buy a beach bungalow or mountain cabin, you can't take a tax deduction on the interest. The idea is, you're supposed to be enhancing your current home — the one you're borrowing against. There's one way the tax break might still apply with a second-home purchase, says Dennis Shirshikov, head of content at a real estate investment platform: 'Buying adjacent land or property can be considered part of this [home enhancement], especially if it's demonstrable that such an acquisition improves or complements the value or utility of the main residence.' For example, you use home equity funds to acquire some wooded acres behind your place to clear and build a little guest house; or you buy the house next door and connect it to your residence. Shirshikov recalls a case where a homeowner used a home equity loan to purchase a vacant lot adjacent to their primary home. 'The rationale was that this purchase prevented a potentially obstructive development on that land, thereby preserving the home's view and value,' he says. 'The IRS accepted this as a substantial improvement to the residence.' Even without a tax break, a home equity loan or HELOC could provide handy funds to fix up and run a second place. Home maintenance requires a considerable outlay these days, averaging over $8,800 a year, according to Bankrate's Hidden Costs of Homeownership Study. People often overlook these routine repair and upkeep expenses when budgeting to buy a home – and perhaps that's why Bankrate's 2025 Homeowner Regrets Survey found that those with regrets about their home purchase most commonly named maintenance and other hidden costs. Specifically, 42 percent of them cited these costs as being more expensive than they anticipated. Given the realities of today's real estate market, coming up with down-payment cash is a big sticking point for would-be buyers. According to Bankrate's 2025 Down Payment Survey, over four-fifths (81 percent) of aspiring homeowners say down payment and closing costs pose a 'very significant' or 'somewhat significant' obstacle to owning a home some day. It's a key reason they're holding off on home-buying. $55,500 The median down payment for a U.S. home in February 2025, about 15% of the median sales price ($374,344). That amount is up 11% year-over-year. Source: ATTOM If you have trouble coming up with a down payment, then tapping into your home equity could be worth considering. Just one catch: Not all lenders will let you put home equity money towards a new home if you're financing the rest of it with a mortgage. There isn't a widespread industry rule against it, says Matt Dunbar, senior vice president, southeast region for Churchill Mortgage. But, because a down payment is supposed to be a cash contribution, an issue can arise if the money has strings attached. 'The critical aspect for lenders when evaluating such scenarios is ensuring the borrower's debt-to-income (DTI) ratio accurately reflects all financial obligations, including the new debt incurred from the HELOC' or HE Loan, he explains. Dunbar recommends getting and depositing the home equity money well before your mortgage application, to give the funds time to season (and for your credit report to reflect the debt). You might also double-check the fine print of your home equity loan or HELOC contract, to make sure it doesn't prohibit buying or investing in real estate. You can also use equity to purchase an investment property — real estate you're going to sell or rent out for income. As noted above, make sure you're working with a lender that lets you put your home equity loan funds towards this sort of purpose: Though it's getting more common, the norm for many financial institutions, like retail banks and credit unions, is to limit home equity financing to primary homes, says Jay Garvens, head of the Colorado Springs-based Garvens Group of Churchill Mortgage. Look to other lender types: 'Stand-alone mortgage companies will allow HELOC funds to be used for a second home or an investment property,' he notes. The biggest benefit: If you've built up a lot of equity, your home equity loan or HELOC lets you access a large amount of money. That's important when buying investment properties, which have stricter eligibility criteria than second homes and typically require a 15 to 25 percent down payment. At the same time, there are risks involved in using equity to finance an investment property. Ideally, your new property will generate consistent income (via its rents or leases) to help you repay your home equity loan or HELOC on time – but, unfortunately, that's not guaranteed. Let's say you remodel your new investment property with the intent to sell it for a profit. What happens if you can't attract a qualified buyer? Or, what if you put a house on the rental market but struggle to find a reliable tenant? In either case, you'll still be responsible for paying back what you've borrowed – and if you can't afford it, you could lose your property. Home equity loans and HELOCs are a popular financing tool these days – but they aren't your only option. In fact, 'just because you can, doesn't mean you should,' says Greg McBride, chief financial analyst at Bankrate. 'You may have a pile of equity in your primary home, but borrowing from that equity to purchase a second home is a costly proposition. This is a high cost of borrowing that puts your primary home on the line in the event of default.' If you do think twice before tapping it, alternatives do exist. Some of these options offer funding for most of the purchase; others are more to cover the upfront expenses (down payment, closing costs). They include: New mortgage: 'In most cases, prospective second-home buyers would be better off taking a mortgage on the property they're acquiring instead,' says McBride. Since the new place is the collateral, the mortgage interest will be tax-deductible if you itemize (up to the overall mortgage-debt limit, which tallies all your home loans). Of course, you'll need enough cash on hand to cover the down payment. Retirement savings: You might be able to put as much as $50,000 towards a second home by taking out a loan from your 401(k) plan (assuming your plan offers the option). You'll have five years to repay it (less if you leave your job), without penalties or paying taxes. Personal loans: With a personal loan, you can typically borrow as much as $50,000; some lenders will even offer up to $100,000 for qualified applicants — enough to get you over the finish line in an all-cash deal. However, personal loans tend to have higher interest rates than home equity products. Also, most lenders won't let you use an unsecured personal loan on a mortgage-financed purchase. Cash-out refinance: When you take out a cash-out refinance, you'll replace your current mortgage with a bigger one. The new loan will include your remaining mortgage balance, as well as a portion of the equity you've built over the years — which you receive in a cash payout to use immediately. Reverse mortgage: If you're 62 or older and have substantial equity in your home, you could swap some of that equity for cash with a reverse mortgage. Under this arrangement, you'll receive tax-free payments from your lender, which must be repaid when you move out, sell your home or pass away. Private lending/investing: You might also consider borrowing from a peer-to-peer (P2P) lender for your home purchase. Another option: a shared equity agreement, in which an investment company gives you a lump sum in exchange for a piece of your primary home's future (presumably appreciated) value. How long do I have to wait until I can sell my house after taking out a home equity loan? There's no set length of time, but you'll need to repay the balance on your home equity loan when you sell (or technically, close). Ideally, you'll earn enough money from the sale to pay off the remainder of your loan, as well as whatever's left on your primary mortgage. However, if the proceeds won't be enough to settle these debts, you may want to hold off on selling until you increase your equity stake, so the money from the sale can fully cover your loan balance. Bankrate's home equity calculator can help you figure out your break-even point. Does a home equity loan put me upside down on my mortgage? Not necessarily, and not often — one big reason lenders limit the amount of home equity you can borrow against is to ensure you don't end up owing more on your home than what it's worth. But becoming upside down or underwater can happen if your home's value drops significantly after taking out the loan, making it worth less than the sum total of all your home-secured debts. Is it better to take the money in a lump sum (a home equity loan) or to use a HELOC when purchasing a second home? It depends on your plans and goals for the new place. If you only need a certain amount of money for a down payment and prefer a predictable schedule of fixed repayments, a home equity loan is a better bet. On the other hand, maybe you want to renovate the property within the next couple of years, but you aren't sure how much it'll cost. In that case, you might take out a HELOC to both buy and fix up your second home, since it lets you withdraw money on an ongoing basis as needed. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
2 days ago
- Business
- Yahoo
Should you use your home to pay medical bills?
One way to clear medical debt or cover upcoming healthcare costs is to tap into your home's equity via a HELOC. HELOCs offer flexible repayment periods with few restrictions and lower interest rates than personal loans or credit cards. On the downside, HELOCs put your home at risk if you can't make payments, and their variable interest rates can make payments jump in size. If you're struggling under the weight of medical bills or worried about covering future care costs, there may be one way to lighten the load: tapping your home equity. But is it a wise move? Read on for a full check-up to determine if the procedure is worth the risk. Bankrate's 2025 Credit Card Debt Survey found that, among credit card holders who carry a balance from month to month, 10% cite emergency/unexpected medical bills as the biggest reason for doing so. If you have a sizable equity stake in your home – meaning you have paid off a chunk of your mortgage – yes, you can borrow against it to pay medical bills. One easy way to tap the funds is via a home equity line of credit (HELOC), which gives homeowners flexibility around both borrowing and repaying funds. To get approved for one, you'll need to follow a lender's criteria for HELOCs and home equity loans, which typically require that you have a 20 percent equity stake in the property, and that you leave at least 10 to 15 percent of it untapped. A HELOC is a revolving form of credit, functioning much like a credit card with a very large limit (up to $500,000 or even more). Once the line of credit is established, you can withdraw sums on a rolling basis. Some lenders mandate a large minimum draw upon opening the HELOC. You can literally access those funds in a variety of ways, including an online transfer, a check or a debit card connected to your account. You can only borrow money during the first phase of the HELOC, known as the draw period. It usually lasts up to 10 usually lasts up to 10 years, often requiring minimal monthly payments of just the interest. When the draw period ends, you'll enter the repayment period, during which you'll pay back the money you've borrowed, plus the interest. Repayment periods can last as long as 20 years, though you usually have the option of paying off the HELOC sooner. Even with bad credit, you can get a HELOC to pay your health-care bills. Of course, the stronger your credit score and financials, the better the interest rate and terms will be. A HELOC might sound like the solution to wiping out medical expenses, but as with any financial strategy, there are advantages and drawbacks. You borrow only what you need. During the draw period, you can withdraw as much money as necessary (within your limit) to pay for medical expenses as they come up. Pay interest only on the sums you draw. With many HELOCs, you have the option to pay back just the interest (rather than interest and principal) during the draw period. Also, you'll only pay interest on the amount you actually use. Comparatively low-cost loan. While your exact APR will depend on the lender and your creditworthiness, HELOCs typically have much lower interest rates than credit cards or personal loans. HELOCs may also have better rates than medical loans (a specific type of personal loan for medical bills). Long repayment options. The timeline for your HELOC can vary depending on the amount you borrow and your lender, but typically lasts 20 or 30 years. Repaid principal goes to refresh the credit line, and you can borrow that money again. You could lose your home. The biggest drawback of a HELOC: It's a secured loan, backed by your home, meaning you could lose it to foreclosure if you don't make timely payments. Another serious thorn: If home values fall, you could owe more on your home than it's worth. You'll have a variable interest rate. HELOCs usually come with fluctuating interest rates, meaning they can change up or down over time. That means your monthly payments can vary and, if interest rates rise in general, you'll be paying increasing amounts, pinching your budget. There can be big payment jumps. Your minimum monthly payments are going to make a big leap — often doubling at least — once you enter the repayment period, as they'll include both principal and interest. Also, your HELOC might come with a balloon payment when the draw period ends — a large lump-sum payment of the outstanding balance. Should you sell your home, you'd have to settle the HELOC immediately too, cutting into your proceeds. It's still debt. Using a HELOC for medical expenses essentially replaces unsecured debt with secured debt: It's shifting your burden, but not eliminating it. Depending on how it's reported, the extra HELOC debt could hurt your credit score. In contrast, most medical debt no longer appears on consumer credit reports, as of March. Home equity to the retiree's rescue Retirees and senior citizens, who typically face not just one-time medical expenses but ongoing, long-term care costs, often use their home equity for healthcare — whether they plan to or not, a recently published research brief by the Center for Retirement Research at Boston College found. The brief analyzed a RAND Health and Retirement Study, focusing on Medicare-covered individuals aged 65-plus, with over $100,000 in investable assets. The year they were hit with a long-term healthcare 'shock' (major cost), the value of their primary residence declined, suggesting they borrowed against it to finance the expense. Ironically, in a 2024 Greenwald Research survey cited by the brief, only one-third (31%) of a similar demographic of respondents said they would use home equity to manage healthcare or long-term care costs. 'People do not expect to tap home equity, but typically end up doing so,' the brief concludes. Using home equity for medical bills shouldn't be your first option. While it can give you access to cash fast, there are a number of downsides and risks – the biggest being that you are putting your home on the line. Should you default on the HELOC, the lender could seize the place and evict you. You should also consider how you want to draw the funds. If you're using them to tackle a chunk of existing debt, you'll probably want to make a large one-time draw. If you're earmarking them for upcoming expenses, you'll want to draw funds as you need them. In either case, have a plan for repaying them, noting any fees the lender imposes. Many lenders charge annual fees for keeping the line open or, conversely, prepayment penalties for closing it earlier than the scheduled term. Money tip: If you do make a sizable single draw, it might be to your advantage to lock in the interest rate on it, as many lenders let you do. Be advised, they may charge a fee for that too. If you're thinking about using your home's equity to cover your medical debt, here are a few alternatives you might consider – which don't involve putting your home on the line. Be sure to compare the terms and overall cost of HELOC borrowing against these other methods. Many hospitals and medical providers offer patients a payment plan, allowing you to pay off your medical debt over time in installments. The monthly payment and repayment term can usually be negotiated. Many are interest-free, but make sure to ask about any charges or upfront fees. Medical assistance programs can be a great resource for many people with medical debt. Some organizations, like the The Healthwell Foundation and Patient Access Network (PAN) Foundation, provide grants that can help you pay off your debt more quickly. These groups can also connect you with resources to negotiate your medical debt or help you get more affordable health care. (See 'Tips for paying off medical bills,' below.) Bear in mind these programs are often needs-based and you must meet eligibility requirements, usually related to income. Getting a bill reduction might be as simple as calling your doctor's billing department. Ultimately, doctors and hospitals want to get paid for their services, so they might be willing to relieve some of your debt if you're unable to pay it off entirely. If you need help negotiating your medical bills, consider working with an advocacy group or non-profit that specializes in debt relief. However, some of these organizations might charge a fee for their services. Can your house be taken for outstanding medical bills? Medical debt is unsecured debt, meaning that it isn't backed by a specific asset (like your home). As a result, debt collectors can't directly seize your home — or other property — if you don't pay your medical bills. However, in many states, debt collectors can go through the court system to put a judgment lien on your property for outstanding medical debt — which could result in you losing your home. How else can you use home equity to pay medical bills? In addition to a HELOC, there are two other ways to leverage your home equity to pay for medical bills. A home equity loan is similar to a HELOC but with two key differences: The money comes in one lump sum, and the interest rate is fixed, so you won't ever need to stress about the potential of it rising. The second option is a cash-out refinance, which replaces your existing mortgage with a new loan for a larger amount of money based on your available equity. Are HELOCs hard to get? They can be: They can be. According to data from the Home Mortgage Disclosure Act, nearly half of all applications for HELOCs were denied in the third quarter of 2024. To qualify for a HELOC, you'll generally need to have at least a 20 percent equity stake in your home. You should also have a good credit score (at least 620) and a debt-to-income (DTI) ratio of 43 percent or less, along with a steady income and consistent payment history. Sign in to access your portfolio
Forbes
3 days ago
- Business
- Forbes
Latest HELOC & Home Equity Loan Rates: June 25, 2025
Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations. Home equity loans and home equity lines of credit (HELOCs) allow homeowners to tap into the value of their homes. A home equity loan is a fixed-rate, lump-sum loan that allows homeowners to borrow up to 85% of their home's value and pay that amount back in monthly installments. A home equity line of credit is a variable-rate second mortgage that draws on your home's value as a revolving line of credit. Both options use your property as collateral for your payments, which means your lender can seize your property if you can't repay what you borrow. Ideal for Medium-Sized Projects A $100K HELOC is suitable for more extensive renovation projects or other significant financial needs. Compare the rates and terms to find the best fit for your situation. Access More Funds for Major Investments For larger projects or investments, a $250K HELOC provides the necessary funds with various LTV options. Explore these rates to determine the right balance between borrowing capacity and risk. Maximize Your Borrowing Power If you have substantial equity in your home and need significant financing, a $500K HELOC offers a great deal of borrowing power. Evaluate these options to find the optimal rate and term for your goals. A 5-year term offers a shorter repayment period with typically higher monthly payments. These products are suitable for borrowers looking for a quicker payoff. With a 10-year term, borrowers can enjoy a balanced monthly payment while still building equity quickly. 10-year home equity loans are ideal for medium-sized projects or financial needs. A 15-year term provides lower monthly payments compared to shorter terms, offering more affordability while still progressing toward your financial goals. Offering longer repayment and lower monthly payments, 20-year home equity loans are suitable for larger investments and long-term financial planning. The 30-year term maximizes affordability with the lowest monthly payments. These options are best for substantial borrowing needs and long-term investments. Home equity represents how much you own of your home compared to what the bank or mortgage lender owns. If you've paid off your home in full, you have 100% equity. You can utilize your home's equity without paying off your home in full, whether through a home equity loan or a home equity line of credit (HELOC). You can use your home's equity for home improvements, repairs, debt consolidation and educational costs, among other things. You earn home equity every month when you make your mortgage payments. The more payments you make, the more your equity increases. A home equity loan is a lump-sum loan based on how much of your home you own outright. So if your loan-to-value ratio (LTV) is 50%, you can borrow, say, 80% of that LTV. Most lenders won't let you access 100% of your home's equity, but even getting a portion of it through a home equity loan could be a game-changer for your big financial needs. You'll calculate your home equity by taking your home's current value - based on its most recent appraisal - and subtracting it from your current mortgage balance. For example, say your home is valued at $500,000 and your mortgage's outstanding balance is $250,000. This would mean you have $250,000 in home equity, and your loan-to-value ratio (LTV) would be 50%. If you're looking for a home equity loan or line of credit, lenders usually only approve up to a certain LTV ratio. For example, some lenders require 80% LTV or less.
