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Feb 27, 2026

HELOC vs. Home Equity Loan: Which Is Right for You?

HELOC or home equity loan? Current rates are 7.23% vs 7.44%. We break down flexibility, risk, total interest costs, and which product fits which situation with verified 2026 numbers.

When homeowners decide to tap their equity, they typically face the same choice: a home equity line of credit (HELOC) or a home equity loan (HEL). Both let you borrow against your home's value. Both use your home as collateral. And as of late February 2026, both are priced at the lowest rates in three years.

But they are fundamentally different products -- and choosing the wrong one means either paying more than you should or not having access to money when you need it.

Here is a complete, numbers-first comparison.

Current Rates (February 27, 2026)

Per Curinos, based on borrowers with 780+ credit score and CLTV under 70%:

  • HELOC: 7.23% average (variable, tied to prime rate of 6.75%)

  • Home Equity Loan: 7.44% average (fixed for the life of the loan)

The HELOC is currently cheaper by 21 basis points. That spread can flip. In 2023, when the Fed was aggressively hiking, HELOCs became more expensive as prime climbed. The fixed rate on a HEL is insurance against that scenario.

How Each Product Works

A HELOC functions like a credit card secured by your home equity. You receive a credit limit and draw from it as needed during a draw period (typically 10 years), paying interest only on what you have drawn. As you repay, the credit becomes available again. After the draw period, the outstanding balance enters a repayment period -- typically 20 years -- at a rate that adjusts with the prime rate.

A Home Equity Loan delivers a lump sum at a fixed rate. You start repaying immediately -- principal plus interest -- from month one. The payment does not move for the life of the loan.

Side-by-Side: $200,000 at Current Rates

Feature

HELOC

Home Equity Loan

Rate

7.23% (variable)

7.44% (fixed)

Draw structure

As needed, revolving

Lump sum upfront

Draw period payment

$1,205/mo (interest-only)

N/A -- repayment starts immediately

Repayment payment (P+I, 20yr)

$1,578/mo

$1,604/mo

Total interest if carried full term

$323,399

$184,926

Rate certainty

No

Yes

Flexibility

High

Low

The total interest figure is the number most people miss. If you draw $200,000 on a HELOC and make only interest-only payments for the full 10-year draw period, you pay $144,600 in interest before touching a dollar of principal. Then you enter a 20-year repayment period and pay another $178,799 in interest -- for a total of $323,399.

The home equity loan at $1,604/month for 20 years costs $184,926 in total interest -- $138,473 less. That difference is real, and it reflects the cost of the HELOC's flexibility and lower initial payment.

For borrowers who know they need the full amount and will not be aggressively paying it down during the draw period, the math often favors the home equity loan despite its slightly higher monthly payment.

When Each Product Wins

Choose a HELOC when:

You are funding a multi-phase project. A renovation that unfolds over 12-24 months is the textbook HELOC use case. You draw as contractors invoice you, paying interest only on what has been spent -- not on a $200,000 lump sum you have not yet used.

You plan to pay down the balance during the draw period. The interest-only minimum does not stop you from paying more. If you draw $100,000 and pay aggressively during the draw period, you dramatically reduce total interest cost and the repayment-period payment size.

You want a financial backstop. A HELOC available but undrawn costs nothing. It provides liquidity for unexpected large expenses without the cost of carrying a lump sum loan.

You expect rates to fall. With the Fed projected to cut rates in 2026, each quarter-point reduction lowers a variable HELOC payment proportionally.

Choose a Home Equity Loan when:

You need a specific, known amount. Paying off a fixed debt, funding a project with a firm budget, or covering a one-time expense are natural fits for a lump-sum product.

You want payment certainty. If you are on a fixed income or a variable payment would create budget stress, the predictability of a fixed rate has real value beyond the math.

You are consolidating high-rate debt. Trading 22% credit card balances for a fixed 7.44% is a clear financial improvement -- and a fixed rate lets you build a repayment plan with confidence.

You believe rates might rise. If economic conditions shift and the Fed reverses course, a fixed-rate home equity loan protects you.

What Lenders Look For

Both products are underwritten against the same criteria: credit score, CLTV, income, and DTI. Rates vary widely between lenders. Bankrate's February 2026 survey found HELOC rates ranging from just under 6% to 18% depending on borrower profile and lender. Shopping at least three lenders -- banks, credit unions, and online lenders -- before committing is worth the time given how much rates diverge.

Run Your Numbers Before You Decide

The choice between a HELOC and home equity loan comes down to how you will use the money, your risk tolerance for variable rates, and how long you will carry the balance. Hauser's HELOC calculator allows you to explore real monthly costs and total interest before approaching any lender.

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Advised over 100+ homebuyers

Ready when you are.

Book a free call. We'll show you how we work—and whether we're the right fit.

Where are you in your search?

By submitting, you agree to our terms of service.

Advised over 100+ homebuyers

Ready when you are.

Book a free call. We'll show you how we work—and whether we're the right fit.

Where are you in your search?

By submitting, you agree to our terms of service.