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The average amount of home equity that owners have in their homes now sits around $300,000, and it’s rising. This offers homeowners an opportunity to borrow a large amount of money at an interest rate materially lower than what they’d be able to secure with a personal loan or credit card (if they can even get approved with those credit types). But, with a home equity loan or home equity line of credit (HELOC), they’ll be able to borrow a large amount of equity at an affordable rate.
Still, these products don’t operate in the same way, and the costs of using either won’t be identical. While interest rates on both are lower than they were at the start of the year and significantly below where they were in the recent past, the long-term affordability of both should be accounted for now, before owners apply. With the home in question functioning as collateral here, affordability is particularly important to calculate in advance.
Going into summer 2025, then, with two Federal Reserve meetings scheduled and the potential for interest rate cuts rising, owners may be wondering which will be cheaper: a HELOC or a home equity loan? That’s what we’ll examine below.
See how low your home equity loan rate offer could be here.
Will a HELOC or home equity loan be cheaper this summer?
As of late June, interest rates on both home equity products are roughly the same: 8.25% for home equity loans and 8.27% for HELOCs. But those rates may not remain the same for much longer. While most economists don’t expect the Federal Reserve to slash interest rates when the central bank meets again in July, the likelihood of a cut when it meets after that in September is high. According to the CME Group’s FedWatch tool, a cut on September 17 is listed at an 85% chance as of June 25. Fed rate cuts will reduce the rates lenders offer on home equity loans and HELOCs, and those offers could be lowered even before any Fed action is formalized.
In theory, then, a home equity loan, since it already has a lower rate than a HELOC and is positioned to be impacted by Fed rate cuts, could be cheaper this summer. But it depends on when the home equity loan funding is officially secured. That’s because home equity loan rates are fixed while HELOC rates are variable. In other words, if you lock in a home equity loan rate of approximately 8.20% in July, and rates cool later in the month, a HELOC could become cheaper by August as they change monthly for borrowers. HELOCs have seen more material rate drops over the past year or so, too, as they dropped by almost two full percentage points between September 2024 and April 2025, before rising again in recent months. Home equity loan rates, meanwhile, have declined gradually, in smaller increments.
Homeowners, then, will need to carefully consider the lower home equity loan rate they may be able to secure at the start of the summer against the likely lower HELOC rate that may materialize later this summer, perhaps even sooner than expected. Still, with the home functioning as collateral and the possibility of losing it to foreclosure if repayments can’t be made, homeowners who want a secure way to borrow equity may be better served by starting with today’s available home equity loan rates and simply look to refinance in the future if rates decline in a meaningful way.
Compare your current home equity loan and HELOC offers online to learn more.
The bottom line
With HELOC and home equity loan interest rates roughly the same now and with both likely to be equally impacted by any rate cut action, there may not be a credible way to determine which will become cheaper this summer. That said, home equity loans have fixed rates that will prevent borrowers from exploiting a cooler rate climate, while HELOCs, with their variable rates, will allow them to take advantage. The difference in rate structures, then, will need to be accounted for by homeowners before getting started. By closely comparing both and by being realistic about the chances of rate cuts ahead, they can better determine the more affordable way to borrow their equity both now and over the repayment period.
