How to get a low home equity loan rate for 2025
No one wants to pay more than they should. Unfortunately, millions of Americans have done just that in recent years with inflation and elevated interest rates hiked to account for it. And while paying an elevated rate on your credit card or personal loan can be prohibitive, it becomes even more dangerous when borrowing from your home equity. If you fail to repay a home equity loan or home equity line of credit (HELOC) as agreed on, you could risk your homeownership as a result. That's because the home functions as collateral in these unique borrowing exchanges.
Fortunately, right now, today's home equity loan and HELOC interest rates are many percentage points lower than the popular alternatives. And in this changing interest rate climate, borrowers have a multitude of options for securing a below-average home equity loan rate. Below, we'll detail three to know heading into 2025.
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How to get a low home equity loan rate for 2025
Here are three effective ways homeowners can obtain a low home equity loan interest for 2025:
Consider a different lender than your current one
Home equity is calculated by deducting your current mortgage balance from your home's appraised value. And, right now, the average amount that many are calculating is around $320,000. So there's a lot to potentially utilize. But that doesn't mean you need to use your current mortgage lender to do so. You may be able to find a lower rate by shopping around with competitors instead. If you do, consider then returning to your current mortgage lender to see if they can match or even beat it. You may be surprised at how much lower a rate you can secure by simply shopping around and it's easy to do so via online marketplaces now.
Start shopping for low-rate home equity loans here.
Opt for a shorter-term
Currently, the average home equity loan rate range for a 15-year term is between 8.08% to 10.17%, according to Bankrate. For a 10-year term, however, it falls in the range of 7.90% to 9.31%. While those differences may only seem minor on paper, they can add up to real savings over the coming years. So calculate your potential costs with both terms. Your payment will be higher on the 10-year loan but the rate will be lower, saving you significant sums of interest. If you can afford to go with the shorter term, it'll save you both time and money.
Improve your credit profile
If you're searching around for a home equity loan now, you may be able to delay your loan a bit into the first quarter of 2025. And if you can do that, you should consider using the time in between to boost your credit score as much as possible. The lowest rates and best terms will always be reserved for borrowers with the cleanest credit profiles. If you don't have one, then, it may be more advantageous to work on this step, first. And that means avoiding holiday overspending if you want to position yourself for a better home equity loan rate in the new year.
The bottom line
By pursuing lenders other than your current mortgage lender, exploring different rates tied to different repayment terms and doing all you can to improve your credit standing, you'll likely be able to secure a below-average home equity loan rate for 2025. Just make sure to only borrow an amount that you can easily afford to repay, even at that lower rate, to avoid risking your home in the process.
