Compare home equity loan vs HELOC for your renovation or debt consolidation. Calculate payments and total cost. Free calculator. No signup.
Home equity loan and HELOC both let you borrow against your home equity — but they work very differently. A home equity loan gives you a lump sum at a fixed rate. A HELOC is a revolving credit line with a variable rate. The right choice depends on whether you need funds all at once or over time, and your tolerance for variable interest rates.
Home equity loan: lump sum disbursement, fixed interest rate typically 7-9% in 2026, fixed monthly payment, predictable repayment. Best for: one-time large expenses like full kitchen renovation, debt consolidation, or known project costs. HELOC: revolving credit line, variable rate tied to prime rate typically 8-10% in 2026, draw period 5-10 years then repayment period. Best for: ongoing projects with uncertain total costs, emergency fund backup, or staged renovations.
Most lenders allow combined loan-to-value CLTV of 80-85% of home value. Formula: Home value × 80% minus existing mortgage balance = maximum borrowing. Example: $400,000 home, $250,000 mortgage balance. $400,000 × 0.80 = $320,000 minus $250,000 = $70,000 maximum equity line. Some lenders allow 90% CLTV for strong credit profiles.
For a defined renovation with known cost like a $40,000 kitchen: home equity loan is better — fixed rate and payment, one disbursement covers project. For a multi-phase renovation where costs are uncertain: HELOC is better — draw only what you need when you need it and pay interest only on the drawn amount.
Most lenders require 680+ for home equity loans and HELOCs. 620-679 may qualify with higher rates. 740+ gets the best available rates. Lenders also require: sufficient equity (at least 15-20% after borrowing), debt-to-income ratio under 43%, and stable income documentation. Home equity products are underwritten more carefully since your home is collateral.
Post-2017 Tax Cuts and Jobs Act: home equity loan and HELOC interest is only deductible if the funds are used to buy, build, or substantially improve the home securing the loan. Using equity for debt consolidation, vacation, or car purchase: interest is NOT deductible. Using equity for a kitchen addition or bathroom remodel: interest IS deductible up to loan limits.
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The Home Equity Loan vs HELOC Calculator — Which is Right for You? uses the same formulas, rates, and reference data that financial planners, professionals, and government sources publish. Results are estimates intended for planning and education — for situations involving large sums or legal consequences, confirm with a qualified professional before acting.
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