Home Equity Loan vs HELOC Comparison Calculator
Compare a fixed-rate home equity loan against a variable-rate HELOC side-by-side. See monthly payments, total interest, and which option saves more for your specific borrowing amount and timeline.
Home Equity Loan vs HELOC: Key Differences in 2026
Both home equity loans and home equity lines of credit (HELOCs) let you tap home equity using your property as collateral, but they work very differently. According to the Federal Reserve and Consumer Financial Protection Bureau, a home equity loan is a fixed-rate, lump-sum installment loan amortized over a set term (typically 5–30 years). A HELOC is a revolving credit line with a variable rate, structured as an interest-only draw period (typically 10 years) followed by a fully-amortizing repayment period (typically 20 years).
As of May 2026, Bankrate's national average home equity loan rate is approximately 7.5% (fixed) while HELOC rates average 8.5% (variable, tied to prime). Both products have closing costs of $0–$500 (much lower than cash-out refinance's 2–5% of loan amount).
When the Fixed Home Equity Loan Wins
The fixed home equity loan typically wins when:
- You need a lump sum for a defined project (kitchen remodel, debt consolidation, college tuition)
- You want payment certainty — the same payment for the entire term
- You expect rates to rise — a fixed rate protects you from future Fed hikes
- You will repay slowly — fixed amortization spreads cost evenly
When the HELOC Wins
- You need flexible access over time (multi-year renovation, business cash flow)
- You can repay quickly (within 2–3 years) — the interest-only draw period saves cash flow
- You expect rates to fall — variable rate captures Fed rate cuts automatically
- You may not use all the available credit — only borrow and pay interest on what you draw
The Rate Risk Stress Test
This calculator includes a rate stress test on the HELOC because variable rates can swing significantly. Per the Federal Reserve, prime rate has ranged from 3.25% to 8.5% over the past 15 years — a 5+ percentage-point swing. Most HELOC contracts have a lifetime rate cap of 18% but the Federal Reserve recommends underwriting your repayment plan assuming at least a 2% rate rise during the draw period.
The IRS Pub 936 confirms that interest on both home equity loans and HELOCs is tax-deductible only when proceeds are used to "buy, build, or substantially improve" the home securing the loan (post-TCJA rule). Using the funds for credit card payoff or other purposes makes the interest non-deductible.
Combined LTV Limits in 2026
For both products, lenders typically allow a combined loan-to-value (CLTV) of 80–85%, meaning your first mortgage plus the home equity loan or HELOC balance cannot exceed 80–85% of your home's appraised value. Some lenders allow up to 90% CLTV for borrowers with FICO 720+ but charge higher rates.
Sources: Consumer Financial Protection Bureau (consumerfinance.gov), Federal Reserve consumer credit data (federalreserve.gov), Bankrate Home Equity Rate Survey (bankrate.com), IRS Publication 936 (irs.gov). Last updated: May 2026.