Online lender Figure is one of the top HELOC lenders in the nation by loan volume. The main appeal is its fast closing, but you’ll need to draw 100% of the line amount at closing and only have five years to keep borrowing.
Borrowers can draw up to 100% of their home equity with a Farmer's Bank of Kansas City home equity loan. Most lenders only allow borrowers to draw a maximum of 85% of their equity.
Home equity loans
NerdWallet rating
4.5
What we like
Offers loans in terms of 5, 10, 15 and 20 years.
No penalty for early repayment.
Offers a high borrowing limit compared to other lenders.
What we don't like
Home equity loans aren’t available for investment properties or second homes.
Rates and fee information aren't published online.
Borrowers can get a rate discount for enrolling in autopay or by meeting minimum balance requirements.
What we don't like
Average reported time to close on a HELOC (40 days) is slower than most.
You must repay closing costs if you close the line of credit within the first three years.
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About these rates: The lenders whose rates appear on this table are NerdWallet's advertising partners. NerdWallet strives to keep its information accurate and up to date. This information may be different than what you see when you visit a lender's site. The terms advertised here are not offers and do not bind any lender. The rates shown here are retrieved via the Mortech rate engine and are subject to change. These rates do not include taxes, fees, and insurance. Your actual rate and loan terms will be determined by the partner's assessment of your creditworthiness and other factors. Any potential savings figures are estimates based on the information provided by you and our advertising partners.
HELOCs Explained: How They Work and How to Get the Best Rate
A home equity line of credit, or HELOC, is a second mortgage that allows homeowners to borrow against the value of their homes.
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Last updated September 21, 2026
What is a HELOC?
A home equity line of credit (HELOC) is a way to borrow against the value of your home. As you pay down your mortgage and the home’s value appreciates, the share of your home that you actually own (called your equity) grows relative to the portion that the lender owns (your mortgage debt).
By converting some of your equity back into debt, you gain access to a line of credit that you can draw from when you need it. Many lenders will allow you to tap up to 85% of your equity, though some will let you borrow more.
How does a HELOC work?
HELOCs are divided into two parts:
Draw period: You can borrow from the credit line, and minimum monthly payments are usually interest-only (though it’s a good idea to pay toward principal). The draw period is usually 10 years, but this can vary by lender.
Repayment period: You can no longer borrow against the credit line, and the minimum monthly payments include principal and interest until you pay off the loan. The repayment period usually lasts up to 20 years.
Today’s HELOC rates: What to expect
Current rate trends
Most HELOC rates are variable, meaning that they move up and down with the market. This is one risk of HELOCs, because you won’t know what your payments will look like long-term.
This variable rate is influenced by a base rate called the prime rate, which is the lowest credit rate lenders are willing to offer to their most attractive borrowers.
The prime rate usually moves alongside the federal funds rate. The prime rate is typically equal to the federal funds rate plus three percentage points.
The Federal Reserve meets every six weeks and votes to raise, lower or maintain the federal funds rate. When the Fed raises the federal funds rate, the prime rate goes up, and HELOC rates follow. When the Fed cuts the federal funds rate, the prime rate goes down, and so do HELOC rates.
Current prime rate — last changed Sept. 2026
Prime rate last week
Prime rate in the past year — low
Prime rate in the past year — high
Projected median prime rate for 2026
7.00%
6.75%
6.75%
7.50%
7.10%
The last Federal Reserve meeting ended on September 16, 2026, when central bankers voted to raise the federal funds rate by 25 basis points. The next meeting is Oct. 27-28, 2026.
We calculated a projected median prime rate by adding three percentage points (300 basis points) to the median federal funds rate forecasted by Federal Reserve board members and Federal Reserve bank presidents in the most recent Summary of Economic Projections. This summary is updated four times a year.
Jesse Haddad |Loan Officer at Next Door Lending, a wholly owned subsidiary of NerdWallet
On HELOC misconceptions and customer anxieties:
“I think a lot of people get afraid because of the whole "variable interest rate" situation, but they don't realize that it's going off of the prime rate. The prime rate is pretty predictable as far as how the market goes, and they don't realize that you can do an interest-only payment — which makes your payment way lower than what you would actually get on, say, a cash-out refinance.”
How to get the best HELOC rate
Get your financial profile in shape
The best rates are typically reserved for borrowers with these traits:
Enough home equity: Most lenders will allow you to borrow up to 85% of the value of your home, minus what you owe — meaning your equity needs to be at least 15%-20%.
A strong credit score: Borrowers with scores above 740 are more likely to receive the best available rate offers.
Low existing debt: A debt-to-income ratio (the percentage of your income that’s allocated to monthly debt obligations) of 36% or lower will give you the best chances of getting attractive HELOC rate offers.
Shop lenders with the best HELOC rates and fees
As you start your HELOC lender search, NerdWallet’s list of the best HELOC lenders can help you find the right choice for you.
When your rate offers come in, be sure to read the fine print. Some lenders offset low interest rates with higher fees, so you’ll want to choose a lender that offers the best combination of each.
How much does a HELOC cost?
Closing costs for a HELOC may amount to 2% to 5% of the total loan amount. You should also budget for any ongoing yearly fees.
Some lenders don’t charge closing costs at all, though they may require that you keep the line open for a certain amount of time.
Once you have a HELOC, the costs vary, depending on the interest rate, the amount borrowed and whether the credit line is in the draw period or the repayment period.
You pay interest only on the amount you have borrowed. If you have a credit line limit of $50,000, and you borrow $10,000, your interest only applies to the amount you withdrew.
Interest-only payments during the draw period.
Offers flexibility to borrow as you need it.
Cons
A variable interest rate means that your monthly payments may go up.
You could lose your home if you fail to repay.
Alternatives to HELOCs
If you’re not sure if a HELOC is the right choice for you, here are some alternative loan types you can consider.
Home equity loans
Similar to a HELOC, a home equity loan allows you to borrow against a portion of your home equity. However, rather than an open line of credit, you receive the cash from a home equity loan as one lump sum.
Additionally, home equity loans have fixed rates, rather than variable ones. This can make home equity loans a good fit if you know exactly how much you need to borrow and don’t want to risk rising rates.
If your mortgage rate is higher than today’s rates, a cash-out refinance will allow you to refinance to a larger loan with a new interest rate — paying off the original mortgage while you pocket the difference. A cash-out refinancecan also be an ideal option for borrowers who would prefer to manage a single loan, rather than two (like you’d have with a home equity loan or HELOC).
If you don’t have enough equity in your home yet to qualify for a HELOC, you might consider a personal loan instead. Personal loans are less risky, because they aren’t secured by an asset (your home). For this same reason, personal loans usually come with higher interest rates than HELOCs or home equity loans.
Your reasons for needing a loan can determine what type of personal loan is a good fit. For example, if you’re exploring loan options to finance a home repair or renovation, you may be interested in a lender from NerdWallet’s list of the best home improvement loans.
Home equity sharing agreements
While home equity sharing agreements are typically much more expensive than HELOCs or home equity loans, this type of loan also has more flexible borrowing requirements and requires no monthly payments or interest. Instead, you will owe the company a portion of the value of your home at the end of the loan term, to be paid as one lump payment.
DATA: What's the Homebuying Climate this month?
NerdWallet's Homebuying Climate Index puts a familiar weather label on how favorable conditions are for home buyers.
For August, our analysis puts the Climate Index at 53.2 out of 100, keeping the index in Partly Cloudy territory for the 49th straight month as most variables hold relatively steady.
Read more about the factors affecting this month's index to gauge how they might affect your homebuying plans.
In addition to getting the best rate offer, you’ll want to evaluate a lender’s requirements before making a choice.
For example, does the lender require a minimum initial draw? If so, is this more than what you want to borrow? Does the lender offer repayment terms that will allow you to comfortably keep up with monthly payments? Will you have to pay closing costs?
The best HELOC lender for you will align with your needs and qualifications as a borrower.
Is it a bad idea to get a HELOC right now?
Whether or not a HELOC makes sense for you depends on your goals. You take on risk when you borrow against your equity, as you could lose your home if you can’t make your payments. It’s a smarter move to use a HELOC for something that will reinvest in the home and grow your wealth, like putting on a new roof or installing central air. Expenses that aren’t worth this risk — such as a vacation or a wedding — aren’t typically a good use of HELOC funds.
Most HELOCs have a variable rate, so you’ll also want to make sure that you can afford to continue making payments even if the interest rate goes up.
How do I get a HELOC?
A HELOC requires you to provide some of the same documentation you gave when you got the mortgage to buy the home: at minimum, your Social Security number, proof of income and estimated home value. The lender will check your credit report.
After applying, you'll be given a stack of disclosures to read. Underwriting may take anywhere from hours to weeks, and then you'll close on the credit line, similar to closing on the purchase mortgage.
The amount that you can borrow with a HELOC depends on the amount of equity you have in your home, the value of your home, and your financial profile. You can find your estimated borrowing limit using NerdWallet’s HELOC calculator.
Is HELOC interest tax-deductible?
HELOC interest accrued from 2018 to 2025 is only tax-deductible if the borrower meets certain IRS guidelines. Under these conditions, HELOC interest is tax-deductible only if the loan was for a primary or secondary home and if the funds were used to buy, build or substantially improve the home.
