Home equity loan interest rates: how to compare costs

Are you keen to learn about home equity loan interest rates? This guide will break down everything you need to know. We’ll explain:

•  What a home equity loan is
•  How interest rates work for these loans
•  What can affect your interest rate
•  The benefits and drawbacks of home equity loans
•  How home equity loan rates compare to other loans

Deciding to take out a home equity loan is a big step. It can be a bit scary, especially if you don’t know much about them.

But don't worry, we're here to help.

Fixed interest rate

A secured loan may have a fixed or variable rate. A fixed rate can apply for only an initial period, so check what follows it. Secured borrowing is not always cheaper overall than an unsecured loan once fees and the term are included.

Averages

Rates and eligibility change and depend on the product and your circumstances. Obtain a current personalised quotation or mortgage illustration and compare the total cost, fees, rate type and repayment terms; figures in this article are not live offers.

What is the current rate on loans?

There is no verified current market-rate table in this article. A personalised mortgage illustration should set out the rate, APRC, fees, payment schedule and total amount payable.

A shorter term can reduce total interest but usually increases monthly payments. It does not automatically produce a lower interest rate.

Enquire about a secured loan through Loans Warehouse, a credit broker, not a lender. Approval and terms depend on checks. Compare the full cost before applying. MoneyNerd may receive a referral fee. Your home may be repossessed if you do not keep up repayments on a loan secured against it.

Home equity vs personal loan rates

Personal-loan rates also vary by amount, term, eligibility and provider. Compare current personal offers on the same assumptions.

Unsecured borrowing avoids taking property security at outset, while secured borrowing can allow different amounts and terms. Neither product is automatically cheaper or suitable.

Compare the total amount repayable, interest, all fees, the term and early-repayment charges. A lower monthly payment can mean a longer term and a higher total cost. Securing previously unsecured debt against your home puts the property at risk if you cannot keep up repayments.

What is the rate offered on a line of credit?

A US-style home equity line of credit (HELOC) should not be assumed to be a standard UK product. Any UK revolving or drawdown secured facility has its own availability, fees and payment terms. Check whether interest or capital payments are required during the drawdown period and how the balance must be repaid.

The average interest on a HELOC

This guide does not substantiate a current UK average HELOC rate. US statistics or older figures should not be used as a UK quotation.

Compare any available drawdown facility with conventional further borrowing, remortgaging, second charges and unsecured options using the actual total costs.

A Loans Warehouse customer’s experience

Individual experiences vary. Compare the total cost, fees, repayment term and risks before applying. A lower monthly payment may mean paying more overall, and secured borrowing puts your home at risk if repayments are not maintained.

Polly

“This was by far possibly one of the nicest experiences I’ve had getting a secured loan.”

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HELOC variable rate

Rate structure depends on the contract. Variable rates can change payments, while fixed deals may revert after an initial period; review both the initial and later rate.

Is it a good time for a loan?

A statement about borrowing conditions in 2021 is not a reason to borrow today. Suitability depends on current offers, affordability, purpose and alternatives.

Enquire about a secured loan through Loans Warehouse, a credit broker, not a lender. Approval and terms depend on checks. Compare the full cost before applying. MoneyNerd may receive a referral fee. Your home may be repossessed if you do not keep up repayments on a loan secured against it.

How long do I get to repay a loan?

Minimum and maximum terms are product-specific. Compare a term you can afford and the total cost; do not assume every provider offers five to fifteen years or a rate discount for shortening it.

Is there an appraisal?

The lender will require an acceptable valuation, which may be physical, desktop or automated depending on its rules. Ask how it is done and what it costs.

Valuation supports the lender’s security assessment. It does not guarantee the future property value or protect you from negative equity or an unaffordable loan.

You could be charged a fee to complete this process, but some lenders offer to pay this themselves. 

Can I get a loan or HELOC with bad credit?

You may still be able to get one of these loans or lines of credit if you have a poor credit rating, but it will be much more difficult and fewer lenders may be open to giving you credit. You might not get the lower rates offered to those with a good credit score. Each application is assessed on its own merits and there is no way of saying what credit scores are accepted and which ones are rejected.