Quick answer
A home equity loan is a second mortgage that pays you a lump sum against your home equity, usually at a fixed rate, repaid in equal monthly installments over a set term. Because your home secures it, falling behind can lead to foreclosure.
Key facts
7.24%
30-year fixed average (basis of the example rate)
Freddie Mac Primary Mortgage Market Survey · Week of Oct 29, 2026
Example
Borrow $40,000 for 10 years at an example fixed rate of 8.25% and the payment is $491 a month from the first month, with $18,873 of interest over the term. Your first mortgage keeps its rate and balance, which is the main reason to choose this over a cash-out refinance when your current rate is low. The loan sits behind your first mortgage as a junior lien.
Home equity loan vs HELOC
| Home equity loan | HELOC | |
|---|---|---|
| Money | All at once | Draw as needed |
| Rate | Usually fixed | Usually variable |
| Payments | Principal and interest from the start | Often interest-only during the draw period |
On your principal home you can cancel within 3 business days after closing. Interest is tax-deductible only when the money buys, builds or substantially improves the home that secures it — see home equity interest and taxes. The home equity loan guide covers requirements and costs.
Sources
- Freddie Mac Primary Mortgage Market Survey — 30-year fixed rate, national weekly average (Week of Oct 29, 2026)
- CFPB — Right to cancel a refinance or home equity loan on your principal home (Aug 8, 2024)
- CFPB: What is a home equity loan?
- FTC: Home equity loans and home equity lines of credit
Last reviewed Figures are checked against the sources above. Read our editorial policy. This page is general information, not financial advice — see the disclaimer.