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With home values rising in most areas of the country, many homeowners are interested in a home equity line of credit to access cash, especially to fund remodel projects or major home improvements.
In September 2026, the median existing-home price for all housing types was $417,500, which is up 1.3% from a year earlier ($412,300), according to the National Association of Realtors. That is the 39th month in a row of year-over-year price gains, so many homeowners have equity they can borrow against.
A home equity line of credit (HELOC) is a secured loan with your house as collateral with no restrictions on how you can use the money. In addition to home improvements, you can use the funds to pay off medical expenses or help your child with college. But remember, if you take out a home equity line of credit against your house and you can no longer afford the payments, the lender can foreclose on your home.
Check today's mortgage rates here (Nov 6th, 2026)
Home equity line of credit interest rates
HELOC interest rates are typically variable, and lenders often tie them to the prime rate. What is the prime rate? It’s the interest rate that commercial banks charge their most creditworthy customers, usually large corporations. The prime rate is important for individual borrowers too, as it is a common index for HELOCs and a base rate for many small business loans.
Lenders set most HELOC rates as the prime rate plus a margin, and these rates can adjust monthly. The prime rate has moved a lot in recent years. It was 3.25% in early 2022 and 8.50% by mid-2023, so check the current rate before you compare offers.
“Home equity loan rates vary from lender to lender and it’s not a bad loan for well-qualified borrowers,” says Mark McClurg, then a mortgage expert at Envoy Mortgage. But, he’s also seen the prime rate change rapidly. “When interest rates increase 0.5% here and 0.5% there, it can add up. It can change your payments dramatically.”
McClurg also warns of “teaser rates” for home equity loans.
“These are designed to bring in customers. But, they may only last for 3-6 months, then the rate rises dramatically. Make sure your rate is clearly defined in the paperwork and what changes will happen when.”
HELOC lending limits
With a home equity line of credit, you’ll only have access to a specific amount of credit. Lenders set a credit limit by taking a percentage of the home’s appraised value and subtracting the balance you owe on your mortgage. The exact percentage will vary from lender to lender. Lenders will also consider your income, current debts, other financial obligations as well as your credit history.
HELOC Calculation Example
| Appraised value of home | $100,000 |
| Percentage | x 75% |
| Percentage of appraised value | = $75,000 |
| Less balance owed on mortgage | – $40,000 |
| Potential line of credit | $35,000 |
Example for illustration only. Each lender sets its own percentage. For more, see the Consumer Financial Protection Bureau HELOC booklet
How to compare HELOC terms
The Federal Trade Commission advises getting quotes from several lenders and comparing their rates and fees. Reach out to banks, credit unions, mortgage companies and make sure to compare each lender’s terms and conditions. Also, pay close attention to fees as well as points, financing charges, and closing costs. These could mean higher costs.
With a HELOC, you can pull money out at intervals whenever you need it, at least for a period of time. Many HELOCs have a set fixed period, typically 10 years, when you can borrow money. Lenders call this the “draw period,” and you may be able to renew the credit line.
“You can usually only draw from a home equity line of credit for 10 years, and then you have to reapply. But, that will vary from lender to lender,” McClurg says.
Not all plans allow for renewals, however. At this point, you’ll have to start making payments. Some plans require payment in full of any outstanding balance, while others allow for repayment over a fixed period of time (which lenders call the “repayment period”).
Check your eligibility for a HELOC here (Nov 6th, 2026)
Is an appraisal required with a HELOC?
In general, you’ll need a new appraisal to qualify for a home equity line of credit. Though, some credit unions and banks will use county assessments and automated valuation models.
“There is a lot of data available to support neighborhood values. Instead of an appraisal, sometimes lenders will do a drive-by appraisal with a few photos taken,” says McClurg.
However the lender determines a current home value, it needs that value to calculate the amount of credit you’ll be eligible to borrow.
Alternatives to a home equity line of credit
If you need access to cash, but a HELOC doesn’t sound like a right fit for you, there are a couple of alternatives that you should consider. Those options include:
Personal Loans. This is a good option if you don’t want to touch your home’s equity to access cash. Unlike a HELOC, where you take out funds as needed, a personal loan is a lump sum. They’re also relatively quick and inexpensive to process, so you can usually get the cash sooner than with a HELOC. Keep in mind, terms are generally much shorter and lenders base interest rates on your credit history. In general, the lower your credit score, the higher your rate.
Cash-out Refinance. This refinance loan is similar to a HELOC in that it allows you to tap into your home equity and turn it into cash by refinancing your current loan for more than you owe. Because this is a refinance loan, the documentation and appraisal requirements are similar to a HELOC. But, you also have the potential of lowering your monthly payment and removing private mortgage insurance in some scenarios. Keep in mind that a cash-out refinance replaces your whole mortgage at a new rate. If your current rate is lower than that new rate, a HELOC lets you keep your first mortgage as it is.
