Question 1

How much equity do I need to get a HELOC?

Accepted Answer

Most lenders require at least 15%–20% equity in your home after the HELOC is added. This is expressed as a combined loan-to-value (CLTV) ratio — lenders typically cap at 80%–85% CLTV. If your home is worth $400,000 and you owe $300,000 (75% LTV), you have $100,000 in equity but can only borrow up to $20,000–$40,000 to stay under 80%–85% CLTV. You'll also need a credit score of at least 620 (most lenders prefer 680+) and sufficient income to qualify.

Question 2

What's the difference between a HELOC and a home equity loan?

Accepted Answer

A HELOC (Home Equity Line of Credit) is a revolving credit line — you draw what you need, pay it back, and draw again, similar to a credit card. Rates are variable (typically Prime Rate + 0–2%). A home equity loan gives you a lump sum at a fixed rate with fixed monthly payments, like a second mortgage. HELOCs work better for ongoing expenses; home equity loans work better for one-time large expenses like a roof replacement where you know the exact cost upfront.

Question 3

Is HELOC interest tax deductible in 2026?

Accepted Answer

Only if you use the funds to 'buy, build, or substantially improve' the home securing the loan. Under the 2017 Tax Cuts and Jobs Act, interest on home equity debt used for other purposes (consolidating credit cards, vacations, car purchases) is NOT deductible. Using a HELOC to add a second bathroom is deductible; using it to pay off student loans is not. The deduction is limited to $750,000 in combined mortgage debt. Keep receipts and records of how HELOC funds were used.

Question 4

What are typical HELOC rates in 2026?

Accepted Answer

HELOCs are tied to the Prime Rate (7.50% as of early 2026). Most lenders price HELOCs at Prime + 0% to Prime + 2%, so typical rates are 7.5%–9.5%. Your rate depends on your LTV ratio, credit score, income, and the lender. Some credit unions offer below-prime teaser rates for the first 12 months. Home equity loans (fixed rate) typically run 7.5%–9% for 10–15 year terms. Shop at least 3–4 lenders — the spread between best and worst offers can be 1.5%+.

Question 5

Should I do a HELOC or cash-out refinance?

Accepted Answer

Depends on your current mortgage rate. If you got a 3%–4% mortgage in 2020–2021, a cash-out refinance replaces that rate with today's 6.5%–7% rate on your entire balance — potentially adding hundreds of dollars per month. In that case, a HELOC keeps your first mortgage intact and only borrows against equity at a higher rate on a smaller amount. Cash-out refinancing makes sense when current rates are lower than your existing mortgage rate. Run both scenarios with our [Refinance Calculator](/calculators/refinance-calculator/).

Product	Rate	How You Access	Payoff	Best For
HELOC	Variable (Prime + margin)	Draw as needed	Interest only during draw period	Ongoing expenses, renovations
Home Equity Loan	Fixed	Lump sum	Fixed payments from day 1	One-time large expense
Cash-Out Refinance	Fixed	Replaces first mortgage	New 30-year mortgage	When your current rate is higher than today’s rates

Home Equity & HELOC Calculator

Calculation methodology

HELOC vs Home Equity Loan vs Cash-Out Refinance

The 80% LTV Rule

What HELOCs Actually Cost

Using Home Equity Wisely

Frequently Asked Questions

CalcWyse Editorial Team

Home Equity & HELOC Calculator

Calculator

Calculation methodology

HELOC vs Home Equity Loan vs Cash-Out Refinance

The 80% LTV Rule

What HELOCs Actually Cost

Using Home Equity Wisely

Frequently Asked Questions

CalcWyse Editorial Team

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