If you’re a homeowner with sufficient equity, you may be able to access a considerable amount of money for home improvements and other expenses. There are two main options when it comes to accessing your equity: home equity loans and home equity lines of credit (HELOCs). Both are known as “second mortgages” since they exist alongside your original first mortgage.

Since interest rates can fluctuate over time, it's important to know how and when to keep track of second mortgage rates if you’re planning to take out a loan. Keep in mind that the term “second home mortgages” is different in that it refers to mortgages used for investment property and vacation homes.

Read on to learn more about the current HELOC and home equity loan rates with tips on how to get the best possible rates.

Current Second Mortgage Rates

Second mortgage rates vary by type of product and lender. Usually, home equity loans have fixed rates, so you’ll have the same rate throughout the loan's life. HELOCs usually have higher initial interest rates in comparison to fixed-rate home equity loans, but their interest rates are variable and can adjust as frequently as monthly, based on some interest rate index, like the Prime Rate or LIBOR rate, which change based on market conditions and the general level of interest rates in the U.S.

These are the average home equity loan rates as of August 14, 2024.  

Average Interest RateAverage Interest Rate Range
Home equity loan8.59%8.45%-9.49%
10-year fixed home equity loan8.72%7.71%-9.52%
15-year fixed home equity loan8.69%7.76%-10.11%

These are the average second mortgage rates for different terms as of August 14, 2024.

5-year home equity loan rates

APR
60% LTV, $50,0008.09%
80% LTV, $50,0008.35%
90% LTV, $50,0009.07%

10-year home equity loan rates

APR
60% LTV, $150,0008.27%
80% LTV, $150,0008.54%
90% LTV, $150,0009.21%

15-year home equity loan rates

APR
60% LTV, $200,0008.45%
80% LTV, $200,0008.73%
90% LTV, $200,0009.38%

20-year home equity loan rates 

APR
60% LTV, $250,0008.68%
80% LTV, $250,0009.04%
90% LTV, $250,0009.60%

30-year home equity loan rates

APR
60% LTV, $500,0009.24%
80% LTV, $500,0009.87%
90% LTV, $500,00010.00%

The average HELOC rate as of August 14, 2024, is 9.37%. Here’s how much you can expect to pay for different HELOC amounts on average. 

$100,000 HELOC rates

APR
60% LTV9.10%
80% LTV9.28%
90% LTV10.18%

$250,000 HELOC rates

APR
60% LTV9.09%
80% LTV9.28%
90% LTV10.22%

$500,000 HELOC rates

APR
60% LTV9.14%
80% LTV9.35%
90% LTV10.35%

What are Second Mortgage Rates?

When you borrow a second mortgage, you’re borrowing against the equity you’ve built in your home. Your equity is the difference between the current value of your home and the balance on your first mortgage. Your home equity represents the dollar value amount of the portion of your house that you directly own alongside the portion your first mortgage lender owns.

Second mortgage rates refer to the interest rate you’ll pay for borrowing a HELOC or a home equity loan. The lender will provide you with funds that can be used for a variety of purposes, such as for home repairs and debt consolidation. In return, you’ll pay interest charges on the amount you borrow.

If you’re planning to tap into the equity of your home, it’s important to compare the pros and cons of home equity loans and HELOCs, as well as the interest rate you’ll pay for each of those options.

How are Second Mortgages Different from Primary Mortgages?

When you purchase a home, you’ll usually borrow money from a financial institution by using your home as collateral. This is your primary mortgage or “first” mortgage. You’ll need to repay this loan with interest through monthly installments.  This first mortgage can be issued with a fixed or adjustable interest rate, but the overwhelming majority of first mortgage loans are issued with a fixed rate.  Nearly all first mortgage loans are issued with a fixed repayment term of 10 to 30 years.

As you continue to make payments on your primary mortgage and your home appreciates in value, your equity ownership in the home increases. This is the difference between the home’s market value and the outstanding mortgage balance.

At the same time, your first mortgage lender’s ownership in your home decreases, as you pay down your first mortgage loan balance.  So, as time goes on, and you continue to make your monthly loan payments, the equity you own in your home gradually increases, until you pay off your mortgage loan balance entirely and you own your home outright.

If you decide to borrow against this equity, the loan you take out is known as a second mortgage. Your second mortgage is also secured against your home and needs to be repaid with interest over time.  

Pros and Cons of HELOC and Home Equity Loans

Borrowing a home equity loan or HELOC has a number of advantages, but you also risk foreclosure if you can’t repay what you borrow. Here are a few pros and cons to keep in mind before you decide if they’re right for you.

Pros

  • Higher borrowing limits compared to personal loans
  • Lower annual percentage rates (APRs) compared to credit cards and other unsecured loans
  • Interest may be tax-deductible when you use the funds for eligible expenses
  • Ideal for funding home improvements and larger purchases

Cons 

  • Longer loan application and funding time compared to personal loans
  • You risk foreclosure if you can’t repay your loan
  • You may end up with an underwater mortgage if your home’s value drops
  • Closing costs can be expensive

How To Find the Best HELOC and Home Equity Loan Rates

With so many different lenders to choose from, it’s important to compare your loan options to find the best possible rates. Here are a few tips to help you find the best options available.

Researching Different Lenders

Compare the rates and fees of at least three different mortgage lenders to find the lowest rates. Some lenders may also offer rate incentives and discounts if you have other accounts with them. Prequalify when possible to get a better understanding of the rates you qualify for.

While comparing interest rates is important, there may be other fees that lenders charge, such as origination fees, appraisal fees, and other closing costs. These closing costs can range from 2% to 6% of your home equity loan amount or your HELOC’s initial credit limit.  

Also, comparing the annual percentage rates (APR) among various lending alternatives is always the best practice since the APR takes into account not only the interest rate but all of the loan’s applicable fees as well.  This will give you the true cost of borrowing money using any particular loan or line of credit you’re considering.

Improving Your Credit Score

One of the best ways to improve your chances of qualifying for the best possible lending terms is by increasing your creditworthiness. Most home equity lenders require an average credit score (among the three major credit reporting agencies) of at least 620. The higher your FICO score, the better rate you can qualify for.

Pay your bills on time, pay down your credit card balances, and review your credit report regularly to improve your credit score over time.

Reduce Your DTI Ratio

Other than your credit score, lenders will also look at your debt-to-income (DTI) ratio when qualifying you for the loan. Usually, you should be able to qualify with a DTI ratio of 43% or lower, but you could get better rates if you pay down your debts and reduce your DTI percentage.

Eligibility Requirements for a Second Mortgage

Qualification requirements for home equity loans and HELOCs vary by lender. However, these are the basic requirements you’ll need to meet:

  • A credit score of at least 620
  • A stable income and employment history
  • A DTI ratio of 43% or lower
  • At least 20% equity in your home

While you may be able to qualify with some lenders, even if you don’t meet these requirements, you may pay higher interest rates.

Compare Second Mortgage Rates Before You Apply for a Loan

While a home equity loan or HELOC is a great way to fund your home improvement project, you’ll need at least 20% equity in your home to qualify. You’ll then have two separate payments each month: a first mortgage payment and a home equity loan or HELOC payment.

A good rate is usually a rate that’s lower than the national average. If you’re in the market for a new loan, we recommend keeping track of the current second mortgage rates on a regular basis. Generally, borrowers with higher credit scores and a lower DTI and loan-to-value (LTV) ratio get the most competitive rates. You may also qualify for rate discounts if you set up automatic withdrawals for the loan.   

Keep in mind that there are other options to consider, such as a cash-out refinance, which involves replacing your current mortgage with a larger one and getting a lump sum of cash for the difference. Refinancing can be done with a fixed interest rate or adjustable-rate mortgage loan so it’s best to check which option will fit your financial situation.